Because the Chilean peso appears to be undervalued relative to the British pound and is likely to rise, Chilean bond yields may be lower than they should be relative to British bonds. The peg linking Denmark’s currency to the euro is considered to be at risk and likely to break. Therefore, Danish bond yields are expected to drop if the Danish krone weakens relative to the euro. After removing expected inflation, the real bond yield is likely to be similar in Singapore and Sweden. Of Kumar’s three points regarding interest rate linkages among countries proposed for the new fund, she is least likely correct with respect to bond yields in: A Singapore and Sweden. B Denmark. C Chile.
