Assume That the U

question 35

Multiple Choice

Assume that the U.S. interest rate is 11 percent, while Australia's one-year interest rate is 12 percent. Assume interest rate parity holds. If the one-year forward rate of the Australian dollar was used to forecast the future spot rate, the forecast would reflect an expectation of:​

• A)depreciation in the Australian dollar's value over the next year.
• B)appreciation in the Australian dollar's value over the next year.
• C)no change in the Australian dollar's value over the next year.
• D)information on future interest rates is needed to answer this question.

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Definitions:

Quality Of Income Ratio

A ratio that measures the proportion of income generated from the core operations of a business.

Operating Assets

Assets used by a company in its daily operations to generate income, including machinery, buildings, and equipment.

Revenue Recognition

The accounting principle that determines the specific conditions under which income becomes realized or earned as revenue.

Quality Of Income Ratio

A financial metric assessing the proportion of income that is realized in cash, indicating the reliability of reported earnings.