Prohibited by law from taking advantage of this opportunity

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Reference no: EM131884128

Throughout the? 1990s, interest rates in Germany were lower than interest rates in RussiaRussia. As a? result, many GermanGerman investors were tempted to borrow in Germany and invest the proceeds in Russia. Which of the following explains why this strategy does not represent an abritrage? opportunity? ?(Select the best choice? below.)

A. Other things besides money enter the picture. By investing overseas GermanyGermany looks weak and so this is regarded as an unpatriotic act. When the cost of appearing unpatriotic is taken into? account, the profits are erased.

B. It is an arbitrage opportunity.

C. Most GermanGerman investors were prohibited by law from taking advantage of this opportunity.

D. Engaging in such transactions may incur a loss if the value of the Russian rouble Russian rouble falls relative to the German markGerman mark. Because a profit is not? guaranteed, this strategy is not an arbitrage opportunity.

Reference no: EM131884128

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