Because Interest Returns Are Known Ex Ante, the Only Unknown

question 107

Multiple Choice

Because interest returns are known ex ante, the only unknown factor in the carry trade (international investments) is:

• A) government tax policy.
• B) default risk.
• C) exchange rate risk (forecast error).
• D) climate change risk.

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Definitions:

Contract With America

A document released by the United States Republican Party during the 1994 congressional election campaign, outlining policy reforms and initiatives they promised to enact if they gained control of Congress.

Clinton

Refers to William Jefferson "Bill" Clinton, the 42nd President of the United States (1993–2001), known for his economic policies and being the second president to be impeached.

Compounded Monthly

Interest on an investment is calculated monthly and added to the principal sum, affecting future interest calculations.

Annual Rate

The interest rate for a period of one year, used to compare the yield of different financial products or investments.