8. What is the risk premium on the foreign bond investment, if the domes- tic interest rate is 4%, the foreign interest

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8 What Is The Risk Premium On The Foreign Bond Investment If The Domes Tic Interest Rate Is 4 The Foreign Interest 1 (89.52 KiB) Viewed 25 times

8. What is the risk premium on the foreign bond investment, if the domes- tic interest rate is 4%, the foreign interest rate is 5%, and the expected future appreciation of the foreign currency (i.e., depreciation of the do- mestic currency) is 1%? A. 1% B. 3% C. 1.80% D. 1.5% E. None of the above. 9. Which of the following appears to be a safe assumption when there is no difference between the forward and spot exchange rate between two currencies? A. The countries have equal nominal interest rates. B. The spot exchange rate is expected to change. C. Expected inflation is less than the nominal interest rate. D. Both currencies are selling at a premium relative to the other. E. None of the above. Please answer all three 10. What policies would you recommend to the U.S. government to lower the current account deficit and decrease net capital inflows? A. Allow the U.S. dollar to depreciate significantly. B. Increase national saving relative to investment. C. Eliminate U.S. federal budget deficits. D. Use trade restrictions such as tariffs. E. All of the above.