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Assume Nominal Rates Are 10% in the United States and 25

Question 80

Multiple Choice

Assume nominal rates are 10% in the United States and 25% in Holland, while the expected rates of inflation are 5% and 19%, respectively. Assuming investments of equal risk, you should invest in:


A) the United States because of the lower inflation rate.
B) the United States because the real return is 1.1% higher.
C) the United States because the real return is 0.37% higher.
D) Holland because the real return is 0.28% higher.

Correct Answer:

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