Foreign citizens would be more likely to engage in foreign portfolio investment in the U.S.if,compared to their country's assets,U.S.assets had
A)a higher interest rate and a higher default risk.
B)a higher interest rate and a lower default risk.
C)a lower interest rate and higher default risk.
D)a lower interest rate and a lower default risk.

Question

Quizplus · Accepted Answer

Foreign citizens would prefer to invest in a country with a higher interest rate as it would lead to higher returns on their investment. However, they would also want to ensure that their investment is safe and would not default. Therefore, a higher interest rate combined with a lower default risk, which is the case in option B, would make U.S. assets more attractive to foreign portfolio investors.

Foreign Citizens Would Be More Likely to Engage in Foreign