To Force the Value of the Pound to Appreciate Against

question 85

Multiple Choice

To force the value of the pound to appreciate against the dollar, the Federal Reserve should:​

• A) ​sell dollars for pounds in the foreign exchange market and the European Central Bank (ECB) should sell dollars for pounds in the foreign exchange market.
• B) ​sell pounds for dollars in the foreign exchange market and the European Central Bank (ECB) should sell dollars for pounds in the foreign exchange market.
• C) ​sell pounds for dollars in the foreign exchange market and the European Central Bank (ECB) should not intervene.
• D) ​sell dollars for pounds in the foreign exchange market and the European Central Bank (ECB) should sell pounds for dollars in the foreign exchange market.

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Definitions:

Quarterly Compounded

An interest calculation method where interest is added to the principal every quarter, increasing the amount of interest earned or paid.

Nominal Rate

Nominal Rate refers to the interest rate before adjustments for inflation or other factors. It is the rate quoted on loans and savings without taking into account the real purchasing power of the money.

GIC

Guaranteed Investment Certificate, a Canadian investment that offers a guaranteed rate of return over a fixed period.

Maturity Value

The total amount that will be paid out or received at the end of a financial instrument's term, including principal and interest.