Throughout the 1990s, interest rates in Japan were lower than interest rates in United States.

As a result, many Japanese investors were tempted to borrow in Japan and invest the proceeds in

United States. Which of the following explains why this strategy does not represent an abritrage opportunity?

Select best choice below

A. It is an arbitrage opportunity.

B. Engaging in such transactions may incur a loss if the value of theU.S. dollarfalls relative to theJapanese yen.Because a profit is not guaranteed, this strategy is not an arbitrage opportunity.

C. MostJapaneseinvestors were prohibited by law from taking advantage of this opportunity.

D. Other things besides money enter the picture. By investing overseasJapan 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.