If Real Interest Rates in Japan Fall Relative to Real

question 88

Multiple Choice

If real interest rates in Japan fall relative to real interest rates in the United States,the yen will likely __________ in terms of the dollar and the dollar will likely __________ in terms of the yen.

• A) appreciate; depreciate
• B) depreciate; appreciate
• C) remain unaffected; remain unaffected
• D) remain unaffected; appreciate
• E) remain unaffected; depreciate

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Definitions:

Rates of Return

The net gain or loss on an investment over a specified time period, expressed as a percentage of the investment's initial cost.

EAR

Effective Annual Rate, a measure of interest that takes into account the compounding of interest over time.

Borrower

An individual, company, or entity that receives funds from another party with the agreement to repay the principal amount along with any agreed-upon interest.

Annualized (Geometric)

Annualized (geometric) refers to the method of calculating an average rate of return that accounts for the compounding effect over a period.