If Interest Rates in Canada Rise

question 207

Multiple Choice

If interest rates in Canada rise,

• A)the value of the dollar will fall as foreign investors sell their Canadian investments.
• B)the value of the dollar will rise as the foreign investors increase their holdings of Canadian investments.
• C)the value of the dollar will fall as foreign investors increase their holdings of Canadian investments.
• D)the value of the dollar will rise as foreign investors sell their Canadian investments.
• E)the value of the dollar will remain unchanged as equal numbers of foreign investors sell and buy Canadian investments.

---

Definitions:

Functional Currency

The currency of the primary economic environment in which an entity operates, and in which it typically generates and expends cash.

Parent's Cash Flows

The cash inflows and outflows directly associated with the primary operating entity in a group of companies or conglomerate.

AASB 121

Refers to the Australian Accounting Standards Board provision dealing with the effects of changes in foreign exchange rates.

Exchange Differences

Variance arising from translating foreign currency transactions or foreign operations into the reporting currency.