Where would you prefer to invest, and why, if nominal rates are 10% in Canada and 25% in Holland, while the expected rates of inflation are 5% and 19% respectively? Assume investments of equal risk.
A) Invest in Holland due to higher nominal rate
B) Invest in Canada; real return is 1.1% higher
C) Invest in Canada; real return is 0.1% higher
D) Invest in Holland; real return is 0.24% higher r$(real) =
Correct Answer:
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