The Most Important Feature of a Fixed Exchange-Rate System Is

question 6

Multiple Choice

The most important feature of a fixed exchange-rate system is that

• A) markets establish the values for currencies.
• B) central banks establish the values for their currencies.
• C) governments establish the values for gold and silver.
• D) governments establish the fixed values for their currencies.
• E) governments buy and sell their currencies.

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Definitions:

Futures Price

The price at which a futures trader commits to make or take delivery of the underlying asset.

Spot Exchange Rate

The current exchange rate at which one currency can be exchanged for another for immediate delivery.

Risk-free Rates

Risk-free Rates represent the return on investment of an absolutely safe asset, with no risk of financial loss, typically exemplified by treasury bills of a stable government.

Spot Exchange Rate

The existing exchange value for immediate buying or selling of a currency.