If the Canadian Real Exchange Rate Appreciates, What Will Most

question 16

Multiple Choice

If the Canadian real exchange rate appreciates, what will most likely happen?

• A) Exports increase and imports decrease.
• B) Exports decrease and imports increase.
• C) Exports and imports both increase.
• D) Exports and imports both decrease.

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Definitions:

Security Market Line

Represents the relationship between the risk of an investment and its expected return, illustrating the risk-return trade-off in capital market theory.

Market Risk Premium

The extra return expected by investors from holding a risky market portfolio instead of risk-free assets.

Security Market Line

A graphical representation used in financial markets to illustrate the relationship between risk and return for individual securities.

Reward-To-Risk Ratio

A measure used in finance to compare the expected returns of an investment to the amount of risk undertaken to capture these returns.