Fixed Exchange Rates

question 71

Multiple Choice

Fixed exchange rates:

• A) can only be altered with the previous authorization of the IMF.
• B) make international transactions more expensive.
• C) allow countries to run large balance of payments imbalances without the need to change their holdings of foreign reserves.
• D) make international transactions easier and less costly.

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Definitions:

Intercompany Bonds

Bonds issued between entities within the same corporate group, often used for internal financing purposes.

Unamortized Acquisition Differential

The portion of the difference between the acquisition cost of an asset and its carrying value on the balance sheet that has not yet been amortized.

Equity Method

A method of accounting whereby an investor records its investment in an associate company at initial cost and subsequently adjusts the carrying amount of the investment to recognize the investor's share of the earnings or losses of the associate.

Amortization

The gradual reduction of a debt or the allocation of the cost of an intangible asset over a period.