A Decrease in the Expected Future Domestic Exchange Rate Causes

question 20

Multiple Choice

A decrease in the expected future domestic exchange rate causes the demand for domestic assets to ________ and the domestic currency to ________,everything else held constant.

• A)increase;appreciate
• B)increase;depreciate
• C)decrease;appreciate
• D)decrease;depreciate

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Definitions:

Required Rate of Return

The minimum annual percentage earned that an investment must generate to avoid loss to the investor.

Present Value

The current value of a future amount of money or stream of cash flows given a specified rate of return.

Cash Inflows

The total amount of money entering a company, typically from operations, financing, and investing activities.

Rate of Return

A measure of the profitability of an investment, indicating the percentage of invested money gained or lost relative to its initial cost.