Consider the possible explanations for why there appear to be excess returns in forex markets. Evaluate the validity and plausibility of each based on the information given in the chapter.

a. At high interest differentials, investors are typically more responsive, conducting large volumes of carry trade. 

b. To execute carry trades, investors must often pay brokerage fees and other transaction costs, allowing for the large and persistent interest differentials observed in the data.

c. The risks associated with forex transactions are relatively low compared with the expected return on carry trades.

d. The existence of the equity premium puzzle is consistent with the existence of excess returns in forex markets.