For the time period between 1992 and 2001, an investor who borrowed Japanese yen at low interest rates and invested in Australian dollar assets at higher interest rates:
A) enjoyed an overall profit because the interest differential was higher than the net exchange appreciation of the yen.
B) suffered substantial losses because the interest differential was lower than the net exchange appreciation of the yen.
C) experienced offsetting positive and negative returns because of long-run swings in the exchange rate.
D) did not realize that, as a result of transactions costs and taxes, any net return would be zero.

Question

Quizplus · Accepted Answer

The Answer of For the time period between 1992 and 2001, an investor who borrowed Japanese yen at low interest rates and invested in Australian dollar assets at higher interest rates:
A) enjoyed an overall profit because the interest differential was higher than the net exchange appreciation of the yen.
B) suffered substantial losses because the interest differential was lower than the net exchange appreciation of the yen.
C) experienced offsetting positive and negative returns because of long-run swings in the exchange rate.
D) did not realize that, as a result of transactions costs and taxes, any net return would be zero.

For the Time Period Between 1992 and 2001, an Investor