The Currency of a Country with a Floating Exchange Rate

question 76

Multiple Choice

The currency of a country with a floating exchange rate:

• A) is set by the government.
• B) is tied to the U.S. exchange rate.
• C) can be freely traded, and its value is determined by the foreign-exchange market.
• D) All of these are true.

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Definitions:

Derivative Instrument

A financial contract whose value is derived from the value of an underlying asset, index, or rate.

Liabilities

Financial obligations of a business, including money owed to creditors or suppliers.

Financial Instrument

Any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.

Bank Overdraft

A facility that allows an individual or business to withdraw more money from a bank account than has been deposited, up to an agreed limit.