Assume identical interest rates on comparable securities in the United States and foreign countries.Suppose investors anticipate that in the future the U.S.dollar will depreciate against foreign currencies.Investment funds would tend to:
A) Flow from the United States to foreign countries
B) Flow from foreign countries to the United States
C) Remain totally in foreign countries
D) Remain totally in the United States

Question

Quizplus · Accepted Answer

When investors anticipate a future depreciation of the U.S. dollar against foreign currencies, they tend to move their investments from the U.S. to foreign countries in order to take advantage of higher returns due to exchange rate fluctuations. As a result, investment funds would flow from the United States to foreign countries.

Assume Identical Interest Rates on Comparable Securities in the United