Question

15. Which of the following is true for a closed economy with regard to savings and invest- ment? (a) S> 1 (b) S< I (c) S<I (d) S -I 16. What risks does an investor face when buying foreign government bonds using an Un- covered Interest Parity strategy (UIP)? (a) This investment strategy leaves investors exposed to only one major risk: that the exchange rate will move unfavourably against them issuer of the asset they have purchased will default on their repayment. issuer of the asset they have purchased will default on their repayment; and that (b) This investment strategy leaves investors exposed to only one major risk: that the (c) This investment strategy leaves investors exposed to two major risks: that the the exchange rate will move unfavourably against them (d) This investment strategy leaves investors exposed to two major risks: that the issuer of the asset they have purchased will default on their repayment; and the possibility that the counterparty to the forward contract might become bankrupt between purchase of the contract and the settlement in a year's time.

Answer 1

As per HOMEWORKLIB RULES first question is answered

Kindly ask rest of the questions in a separate post

15.

Correct option: (d) S = I

Reason: No matter the economy is closed or open, at equilibrium the savings always equal Investment and thus the S=I identity always holds true.