If the U.S. interest rate is 4% per year and the U.K. interest rate is 9% per year, then:
A) an investor will see no reason to invest in the United Kingdom.
B) an investor will borrow money in the United Kingdom and invest it in the United States.
C) an investor can borrow money in the United States and invest it in the United Kingdom and profit.
D) an investor will find that the returns are the same in both countries.

Question

Quizplus · Accepted Answer

The investor can take advantage of the interest rate differential by borrowing in the United States at the lower rate of 4% and investing in the United Kingdom at the higher rate of 9%. The investor will profit from the difference in interest rates.

If the US Interest Rate Is 4% Per Year and the U