Which of the Following Is Likely to Occur When the U.S.dollar

question 34

Multiple Choice

Which of the following is likely to occur when the U.S.dollar is undervalued relative to the peso?

• A) There will be an excess supply of dollars at the pegged exchange rate in the foreign exchange market.
• B) The net exports of Mexico will increase.
• C) The demand for dollars in exchange for pesos will exceed the supply of dollars in exchange for pesos.
• D) The dollar will depreciate against the peso.

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Definitions:

Annual Returns

The percentage change in the value of an investment over a one-year period.

Risk Premium

The extra return expected by an investor for holding a risky asset, compared to a risk-free asset.

Corporate Bonds

Debt securities issued by corporations to finance their operations, expansion, or other spending needs, paying fixed or variable interest rates to investors.

Treasury Bills

Treasury Bills are short-term government securities with maturity periods of one year or less, often used by investors as a low-risk investment option.