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Information on 10-year government bond rates and exchange rates for multiple countries are provided below Country 10-year interest rate (government bond) Exchange rate (per $)
Information on 10-year government bond rates and exchange rates for multiple countries are provided below
Country | 10-year interest rate (government bond) | Exchange rate (per $) |
Brazil | 10.7% | 5.28 |
India | 6.1% | 73.9 |
Turkey | 16.7% | 8.64 |
United States | 1.3% | - |
Assume you have $1000 to invest. Your investment horizon is 10 years, and a 10-year government bond is the investment option you are interested in. Assume that there is no default risk on any of the government bonds listed. Explain why it is not obvious that investing in a foreign country government bond is the better choice.
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