Ignoring risk differences, if we observe American investors purchasing foreign bonds when the U.S.interest rate is above the foreign interest rate, we could assume that:

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Quizplus · Accepted Answer

Investors would purchase foreign bonds expecting the dollar to depreciate, as this would increase the value of their returns when converted back to dollars, offsetting the lower foreign interest rate.

Ignoring Risk Differences, If We Observe American Investors Purchasing Foreign