Paula, a citizen of Spain, decides to purchase bonds issued by Columbia instead of Canadian bonds, even though the Columbian bonds have a higher risk of default. What might be an economic reason for her decision?
A) Columbia has a lower inflation rate.
B) The Columbian bonds pay a higher rate of interest.
C) The Canadian government is more stable than the Columbian government.
D) Columbian bonds have shorter maturity periods than Canadian bonds.

Question

Quizplus · Accepted Answer

Paula likely chose the higher-risk Columbian bonds because they pay a higher rate of interest, meaning she can potentially earn more money despite the added risk.

Paula, a Citizen of Spain, Decides to Purchase Bonds Issued