Which of the Following Statements Regarding the Market for Foreign

question 44

Multiple Choice

Which of the following statements regarding the market for foreign currency exchange is true?

• A)An increase in SA net capital outflow increases the supply of rands and the rand depreciates.
• B)An increase in SA net capital outflow increases the demand for rands and the rand appreciates.
• C)An increase in SA net capital outflow increases the demand for rands and the rand depreciates.
• D)An increase in SA net capital outflow increases the supply of rands and the rand appreciates.

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Definitions:

Coupon Rate

The coupon rate is the interest rate that the issuer of a bond or other fixed-income security promises to pay to the holder annually, expressed as a percentage of the par value.

Interest-Rate Risk

Interest-Rate Risk refers to the risk of investment value changing due to fluctuations in the absolute level of interest rates, which can negatively affect fixed-income securities.

Price Risk

The risk that the price of an asset will change negatively, impacting the investment's value and potentially leading to financial loss.

Reinvestment Risk

The risk that future cash flows (like interest or dividends) will need to be reinvested at a lower return than the original investment.