If the Forward Exchange Rate of the Yen in Terms

question 20

Multiple Choice

If the forward exchange rate of the yen in terms of dollars is greater than the spot exchange rate,

• A)Japanese interest rates must be higher than U.S. interest rates.
• B)U.S. interest rates must be higher than Japanese interest rates.
• C)market participants must be expecting the dollar to appreciate against the yen.
• D)market participants must be expecting the dollar to depreciate against the yen.

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Definitions:

Drive Reduction

A theory in psychology that suggests motivation arises from the desire to reduce internal drives caused by unmet biological needs.

Constant Internal

Ongoing, unchanging processes or conditions within an organism or system.

Blood Glucose

The concentration of glucose present in the blood, which serves as a primary energy source for the body's cells.

Homeostasis

A tendency to maintain a balanced or constant internal state; the regulation of any aspect of body chemistry, such as blood glucose, around a particular level.