Assume That There Are Several Foreign Currencies That Exhibit a Higher

question 11

Multiple Choice

Assume that there are several foreign currencies that exhibit a higher interest rate than the U.S. interest rate. The U.S. firm has a higher probability of generating a higher effective yield on a portfolio of currencies (relative to the domestic yield) if:​

• A)the foreign currency movements against the U.S. dollar are highly correlated.
• B)the foreign currency movements against the U.S. dollar are perfectly positively correlated.
• C)the foreign currency movements against the U.S. dollar exhibit low correlations.
• D)none of the answers above would have any impact on the probability of a foreign cash investment generating a higher effective yield than a U.S. investment.

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Definitions:

Sphygmomanometer

A medical instrument used to measure blood pressure, typically consisting of an inflatable cuff to restrict blood flow and a mercury or aneroid manometer to measure pressure.

Systolic Pressure

The highest blood pressure level reached during the heartbeat cycle when the heart muscle contracts.

Radial Pulse

The pulse felt on the radial artery of the wrist, commonly used to measure heart rate.

Cardiac Output

The volume of blood pumped by the heart per minute, an important measure of heart function and efficiency.