Assume That the U

question 81

Multiple Choice

Assume that the U.S. interest rate is 11 percent, while Australia's one-year interest rate is 12 percent. Assume interest rate parity holds. If the one-year forward rate of the Australian dollar was used to forecast the future spot rate, the forecast would reflect an expectation of:

• A) depreciation in the Australian dollar's value over the next year.
• B) appreciation in the Australian dollar's value over the next year.
• C) no change in the Australian dollar's value over the next year.
• D) Information on future interest rates is needed to answer this question.

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Definitions:

Notes Receivable

Written promissory notes indicating the amounts due to be paid to the holder, recognized as assets on a company's balance sheet.

Maturity Value

The total amount payable to an investor at the end of a bond's term or the final payment due on a loan, including principal and any accrued interest.

Trade Receivables

Amounts owed to a company by its customers as a result of delivering goods or services on credit.

Accounts Receivable

The money owed to a company by its customers for goods or services that have been delivered but not yet paid for.