Assume That the Euro's Interest Rates Are Higher Than U

Multiple Choice

Assume that the euro's interest rates are higher than U.S. interest rates, and that interest rate parity exists. Which of the following is true?

A) Americans using covered interest arbitrage earn the same rate of return as Germans who attempt covered interest arbitrage.
B) Americans who invest in the United States earn the same rate of return as Germans who attempt covered interest arbitrage.
C) Americans who invest in the United States earn the same rate of return as Germans who invest in Germany.
D) Americans using covered interest arbitrage earn the same rate of return as Germans who attempt covered interest arbitrage AND Americans who invest in the United States earn the same rate of return as Germans who attempt covered interest arbitrage.
E) None of these are correct.