If the Nominal Exchange Rate E Is Foreign Currency Per

question 151

Multiple Choice

If the nominal exchange rate e is foreign currency per dollar, the domestic price is P, and the foreign price is P*, then the real exchange rate is defined as

• A)(eP*)/P.
• B)(eP)/P*.
• C)e + P*/P.
• D)e − P/P*.

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Definitions:

Annual Returns

The percentage gain or loss on an investment over a one-year period.

Stock

Equity investment that represents ownership in a company and entitles the holder to a proportion of its profits.

Percentage Return

The increase or decrease in an investment, represented as a fraction of its initial cost and expressed as a percentage.

Preferred Stock

A type of stock that provides a fixed dividend that is paid before any dividends are paid to common stockholders and typically does not have voting rights.