Which of the Following Is False

Multiple Choice

Which of the following is false?

A) Financial market participants compare expected rates of return on instruments denominated in different currencies.
B) The expected nominal rate of return on a foreign investment is the foreign interest rate plus the change in the exchange rate less an adjustment for risk from the uncertainty of the future exchange rate.
C) The expected real return includes an adjustment factor for expected inflation in both countries.
D) In equilibrium, interest rates adjust so that after adjustments have been made for expected inflation and exchange rate risk, returns in the United States are only slightly more than foreign returns.