The Following Are the Net Currency Positions of a Canadian

question 46

Multiple Choice

The following are the net currency positions of a Canadian FI (stated in Canadian dollars) . How would you characterize the FI's risk exposure to fluctuations in the yen/dollar exchange rate?

• A)The FI is net short in the yen and therefore faces the risk that the yen will rise in value against the U.S. dollar.
• B)The FI is net short in the yen and therefore faces the risk that the yen will fall in value against the U.S. dollar.
• C)The FI is net long in the yen and therefore faces the risk that the yen will fall in value against the U.S. dollar.
• D)The FI is net long in the yen and therefore faces the risk that the yen will rise in value against the U.S. dollar.
• E)The FI has a balanced position in the Japanese yen.

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Definitions:

Aggregate Production

The total output of goods and services produced by an economy over a specific time period.

Net National Product

The total market value of all final goods and services produced by the residents of a country in a given time period, minus depreciation.

Real GDP

Gross Domestic Product adjusted for inflation, measuring the value of goods and services produced by a country in real terms.

Base Year

A specific year against which economic growth is measured, serving as a standard comparison for financial indices and economic data.