Suppose that even under the assumption of interest rate arbitrage, the expected rate of return on domestic financial assets is lower than that on foreign financial assets. In that case, the risk of domestic financial assets will be______than that of foreign financial assets, and the liquidity of domestic financial assets will be ______.

• A. higher/higher
• B. higher/lower
• C. lower/higher
• D. lower/lower
• E. None of the above

 

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Suppose that even under the assumption of interest rate arbitrage the ex... View the full answer