Suppose There Are Two Countries, X and Y

question 40

Multiple Choice

Suppose there are two countries, X and Y. If the exchange rate, as measured in X's currency, is currently 9, what do citizens of the nation of Y see when they read their newspapers?

• A) The exchange rate for X's currency is 9.
• B) The exchange rate for X's currency is more than 9.
• C) The exchange rate for X's currency is 3.
• D) The exchange rate for X's currency is 0.11.
• E) Knowing one exchange rate does not mean we can tell the other exchange rate.

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Definitions:

Debt-to-equity Ratio

A measure of how a company's assets are financed, comparing the roles of shareholder equity and debt.

Return on Equity

A metric indicating financial success determined by dividing a company's net income by its shareholders' equity, demonstrating the efficacy of using investments to create increased profits.

Net Profit Margin

A financial metric that shows the percentage of revenue that remains as profit after all operating expenses, interest, taxes, and preferred stock dividends are deducted.

Dividend Yield

A financial ratio that shows how much a company pays out in dividends each year relative to its share price.