Although the Pegged Exchange Rate Between the Yuan and the U.S.dollar

question 68

Multiple Choice

Although the pegged exchange rate between the yuan and the U.S.dollar has undervalued the yuan, China has been reluctant to abandon the peg for fear that abandoning the peg would

• A)increase exports and increase the current account deficit.
• B)reduce capital inflows.
• C)reduce exports and reduce economic growth.
• D)increase Chinese holdings of dollars.
• E)reduce the number of US dollars available to Chinese savers.

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Definitions:

Annuity

A financial instrument that provides a consistent series of payments to a person, often utilized as a source of income for retired individuals.

Equivalent Cash Flows

Streams of equal value cash flows occurring at regular intervals.

Hurdle Rate

The minimum rate of return on a project or investment required by a manager or investor to proceed with the project.

Present Value

The present value of a future amount of money or series of cash flows, using a certain return rate.