Author Question: The problem of moral hazard has led A) the governments of many developing countries to guarantee ... (Read 31 times)

kellyjaisingh · **on:** Jun 30, 2018

The problem of moral hazard has led

A) the governments of many developing countries to guarantee repayment of all loans.
B) to higher growth rates in Latin America.
C) to excessively speculative investment.
D) to both privilege and responsibility of creditors.
E) to stable investments with small and steady expected gains.

Question 2

Arbitrage opportunities exist when uncovered interest rate parity does not hold.

Indicate whether the statement is true or false

joshraies · **Reply #1 on:** Jun 30, 2018

Answer to Question 1

C

Answer to Question 2

FALSE
Explanation: Carry trade involves risk. Arbitrage opportunities may appear when transactions costs are low and covered interest rate parity does not hold.