Catherine, a citizen of Spain, decides to purchase bonds issued by Chile instead of ones issued by the United States even though the Chilean bonds have a higher risk of default. An economic reason for her decision might be that
A)she dislikes U.S. foreign policy.
B)the Chilean bonds pay a higher rate of interest.
C)the U.S. government is more stable than the Chilean government.
D)None of the above provide an economic reason for buying the riskier bond.

Question

Quizplus · Accepted Answer

The economic reason for Catherine's decision is the higher rate of interest offered by the Chilean bonds. This suggests that Catherine is willing to take on a higher level of risk in order to receive a greater return on her investment. The other choices (A and C) do not relate directly to economic reasons for her decision.

Catherine, a Citizen of Spain, Decides to Purchase Bonds Issued