German government bonds, or Bunds, currently are paying higher interest rates than comparable U.S. Treasury bonds. Suppose the Bundesbank eases the money supply to drive down interest rates. How is an American investor in Bunds likely to fare?
Answer to relevant QuestionsIn 1993 and early 1994, Turkish banks borrowed abroad at relatively low interest rates to fund their lending at home. The banks earned high profits because rampant inflation in Turkey forced up domestic interest rates. At ...Chase Econometrics has just published projected inflation rates for the United States and Germany for the next five years. U.S. inflation is expected to be 10% per year, and German inflation is expected to be 4% per year.a. ...Suppose that on January 1, the cost of borrowing French francs for the year is 18%. During the year, U.S. inflation is 5%, and French inflation is 9%. At the same time, the exchange rate changes from FF 1 = $0.15 on January ...In the early 1990s, Japan underwent a recession that brought about a prolonged slump in consumer spending and capital investment. (Some estimate that in 1994 only 65% of Japan’s manufacturing capacity was being used.) At ...What can we learn about economic development and political risk from the contrasting experiences of East and West Germany; North and South Korea; and China and Taiwan, Hong Kong, and Singapore?
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