A Small Economy Country Whose GDP Is Heavily Dependent on Trade

question 21

Multiple Choice

A small economy country whose GDP is heavily dependent on trade with the United States could use a(n) ________ exchange rate regime to minimize the risk to their economy that could arise due to unfavorable changes in the exchange rate.

• A) pegged exchange rate with the United States
• B) pegged exchange rate with the Euro
• C) independent floating
• D) managed float

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Definitions:

Stock Price Volatility

This term describes the degree of variation of a trading price series over time as measured by the standard deviation of returns.

Intrinsic Value

The inherent worth of a financial asset, determined through fundamental analysis without reference to its market value.

Strike Price

The specified price at which the holder of an option can buy (in the case of a call option) or sell (in the case of a put option) the underlying security or commodity.

Call Premium

The additional amount above the bond's face value that must be paid to redeem it before its maturity date.