Assume that the United States invests heavily in government and corporate securities of Australia. In...

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Finance

Assume that the United States invests heavily in government and corporate securities of Australia. In addition, residents of Australia invest heavily in the United States. Approximately, $5 million worth of investment transactions occur between these two countries each year. The total dollar value of trade transactions per year is about $8 trillion. Then ____ directly influences their exchange rate the most.

A. inflation and interest rate differentials

B. Inflation differentials only

C. Income differentials only

D. Interest rate differentials

E. Inflation and income differentials

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