In efficient markets, investment capital flows toward profit opportunities.

When domestic and foreign currency bonds are imperfect substitutes, the domestic interest rate (R) can be written as

A) R = R - (Ee - E)/E + ?. B) R = R - (Ee - E)/E. C) R = R + (Ee - E)/E + ?. D) R = R - (Ee + E)/E + ?. E) R = R - (Ee - E)?.

Which of the following events did not contribute to the high rate of savings and loan failures in the 1980s and 1990s?

a. The bankruptcy of the FDIC b. Deregulation of the banking industry that allowed investment houses to compete with banks and S&Ls for depositors c. The elimination of Regulation Q d. The entry of S&Ls into riskier loan markets e. Substantial fraud in lending activities