Multiple Choice
Suppose that the U.S. interest rate is 5 percent and the Turkish interest rate is 50 percent. The effect of this difference in the foreign exchange market is that
A) financial capital stops moving.
B) an American investor is guaranteed to make an additional 45 percent in dollar terms by investing in Turkey.
C) investors expect the Turkish currency to rise in value (appreciate) against the dollar.
D) investors expect the Turkish currency to fall in value (depreciate) against the dollar.
Correct Answer:
Verified
Correct Answer:
Verified
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