A Flexible Exchange Rate Is an Exchange Rate Whose Value

question 154

Multiple Choice

A flexible exchange rate is an exchange rate whose value:

• A)is determined by the law of one price.
• B)varies according to supply and demand for the currency in the foreign exchange market.
• C)is established annually by the International Monetary Fund.
• D)reflects the comparative advantage of the home country versus other foreign countries.

---

Definitions:

Collection Float

The time period between when a payment is initiated by a debtor and when the funds are actually available to the creditor.

Transaction Motive

Refers to the need to hold cash for the purpose of conducting daily business transactions and operations.

Lockbox System

A service provided by banks to process payments by collecting and depositing checks into the company's account quickly.

NPV

Net Present Value (NPV) is a method used in capital budgeting to determine the value of an investment by calculating the present value of expected future cash flows using a specific discount rate.