Suppose You Think That the Canadian Dollar Exchange Rate Will

question 17

Multiple Choice

Suppose you think that the Canadian dollar exchange rate will depreciate against the U.S.dollar over the next month.What should you do now in anticipation of profit?

• A)Buy Canadian dollars.
• B)Buy U.S.dollars.
• C)Sell Canadian dollars.
• D)Sell U.S.dollars.
• E)Do both B and C.

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Definitions:

Liquidity Preference Theory

A theory suggesting that people prefer to hold their wealth in liquid form for convenience and as a precaution against uncertainty, affecting interest rates.

Yield Curve

A graphical representation of interest rates on debt for a range of maturities, often used as an indicator of economic expectations and interest rate trends.

Normal

Typically refers to something that conforms to a standard or common pattern; in statistics, a distribution that is symmetrically clustered around its mean.

Treasury Bond

A long-term, fixed-interest government debt security with a maturity of more than ten years.