Suppose the Average Interest Rate on Euro Bonds Is 4

Multiple Choice

Suppose the average interest rate on euro bonds is 4%, and the average interest rate on U.S. dollar bonds is 6%. Which should the investor choose?

A) neither-bonds have high default rates
B) both-an investor will choose some euro bonds and some U.S. bonds to diversify
C) the euro bond because their economies are usually more stable
D) It is not possible to answer without information on exchange rates.