Suppose That the U

Multiple Choice

Suppose that the U.S. interest rate is 5 percent and the Japanese interest rate is 1 percent. The effect of this difference in the foreign exchange market is that

A) financial capital stops moving.
B) a Japanese investor is guaranteed to make an additional 4 percent in yen terms by investing in the United States.
C) investors expect the yen to appreciate against the dollar.
D) investors expect the yen to depreciate against the dollar.