You Are Made Better Off in Which of the Following

question 69

Multiple Choice

You are made better off in which of the following situations?

• A)you borrow 10,000 pesos,you earn income in dollars,the dollar depreciates against the peso,you must pay back the loan in pesos
• B)you borrow $10,000,you earn income in pesos,the dollar depreciates against the peso,you must pay back the loan in dollars
• C)you borrow $10,000,you earn income in pesos,the dollar appreciates against the peso,you must pay back the loan in dollars
• D)you borrow 10,000 pesos,you earn income in pesos,the dollar depreciates against the peso,you must pay back the loan in pesos

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Definitions:

Open Market

A marketplace that is accessible to all buyers and sellers where prices are determined by supply and demand.

Stated Rate

The nominal interest rate specified in the contractual terms of a financial instrument such as a bond.

Market Rate

The prevailing interest rate available in the marketplace for securities, loans, and deposits.

A Discount

A reduction applied to the normal selling price of a product or service, typically used as a promotional strategy or to incentivize early payment.