If It Took as Many Dollars to Buy Goods in Canada

question 208

Multiple Choice

If it took as many dollars to buy goods in Canada as it did to buy enough currency to buy the same goods in Honduras, the real exchange rate would be computed as how many Honduran goods per Canadian goods?

• A) one
• B) the number of dollars needed to buy Canadian goods divided by the number of lempira needed to buy Honduran goods
• C) the number of lempira needed to buy Honduran goods divided by the number of dollars needed to buy Canadian goods
• D) a number equal to the nominal exchange rate

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Definitions:

Present Value

The now-value of a prospective sum of money or cash flow sequence, according to a certain rate of return.

Rate of Return

The financial outcome, either positive or negative, of an investment within a set period, delineated as a proportion of the investment’s initial outlay.

Interest Rate

The percentage charged on a loan or paid on deposits over a period of time, often annually.

Future Value

The estimated value of an investment at a specific future date, considering factors like interest rates or returns over time.