Alfonso,a citizen of Italy,decides to purchase bonds issued by Ireland instead of ones issued by the United States even though the Irish bonds have a higher risk of default.An economic reason for his decision might be that
A)he dislikes U.S.foreign policy.
B)the Irish bonds pay a higher rate of interest.
C)the U.S.government is more stable than the Irish government.
D)None of the above provide an economic reason for buying the riskier bond.

Question

Quizplus · Accepted Answer

The fact that the Irish bonds pay a higher rate of interest suggests that they offer a higher potential return for the investor, despite the higher risk of default. This could be an economic reason for Alfonso's decision to choose the Irish bonds over the U.S. ones. The other options - A and C - do not provide clear economic reasons for the decision.

Alfonso,a Citizen of Italy,decides to Purchase Bonds Issued by Ireland