When the Price of Foreign Currency (I

question 146

Multiple Choice

When the price of foreign currency (i.e.,the exchange rate) is below the equilibrium level:

• A) An excess demand for that currency exists in the foreign exchange market
• B) An excess supply of that currency exists in the foreign exchange market
• C) The demand for foreign exchange shifts outward to the right
• D) The demand for foreign exchange shifts backward to the left

---

Definitions:

Indexing

The investment strategy of replicating the performance of a market index, often through passive fund management.

Duration

A measure of the sensitivity of the price of a bond or a fixed income portfolio to changes in interest rates.

Interest-Rate Risk

The possibility of incurring losses in investments as a result of variations in interest rates, especially impacting fixed-income securities.

Coupon

The interest rate paid by a bond, usually expressed as a percentage of the bond's face value.