A Increase in the Value of the U

question 167

True/False

A increase in the value of the U.S. dollar is an example of an economic risk in that it can reduce the value of U.S. multinational firms' international assets and earnings in other countries.

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Definitions:

Equilibrium Risk Premium

The expected return on a risky asset over the risk-free rate that brings the supply and demand for the asset into balance.

Risk-free Rate

The interest rate at which an investor can invest in an absolutely risk-free security over a specified period.

Arbitrage Opportunity

A situation where a trader can profit from differences in price of the same or similar financial instruments on different markets or in different forms.

Risk-free Rate

The theoretical rate of return of an investment with no risk of financial loss, often represented by government bonds.