We would not expect a Japanese financial asset and a U.S. financial asset with identical risk, liquidity, and information characteristics to have different expected returns because
A) the U.S. and Japanese governments have pledged themselves to avoid this outcome.
B) traders would buy the asset with the higher expected yield and sell the asset with the lower expected yield until the yields were brought into equality.
C) traders would sell the asset with the higher expected yield and buy the asset with the lower expected yield until the yields were brought into equality.
D) the exchange rate between the dollar and the yen would adjust automatically to eliminate any difference in yields.
Correct Answer:
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