If a Country's Currency Appreciates and Its Official Holdings of Foreign

question 112

Multiple Choice

If a country's currency appreciates and its official holdings of foreign currency increase. The central bank is ________ foreign currency to limit the appreciation, and the official settlements account balance is ________.

• A)buying; negative
• B)selling negative
• C)buying; positive
• D)selling; positive
• E)buying; zero

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Definitions:

Discount Rate

Within discounted cash flow analysis, it's the interest rate applied to derive the present value of cash flows expected in the future.

Profitability Index

A financial tool used to measure the relative profitability of an investment, calculated as the present value of future cash flows divided by the initial investment cost.

Cash Inflows

Cash inflows are the money received by a business from its various activities, such as sales revenues, financing, and investments.

Investment Projects

Initiatives undertaken by businesses to invest in assets or activities with the expectation of generating future benefits or returns.