Catherine, a citizen of Spain, decides to purchase bonds issued by Chile instead of Canadian bonds, even though the Chilean bonds have a higher risk of default. Which of the following might be an economic reason for her decision?
A)Chile has a lower inflation rate.
B)The Chilean bonds pay a higher rate of interest.
C)The Canadian government is more stable than the Chilean government.
D)Chilean bonds have shorter maturity periods than Canadian bonds.

Question

Quizplus · Accepted Answer

The fact that the Chilean bonds pay a higher rate of interest is an economic reason for Catherine's decision, despite the higher risk of default. The other options (A, C, and D) do not directly explain her decision to buy Chilean bonds over Canadian bonds.

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