If the Fed Decides to Control the Euro/dollar Exchange Rate

question 24

Multiple Choice

If the Fed decides to control the euro/dollar exchange rate:

• A) they will also have to control the domestic interest rate.
• B) they will have to control the amount of banking system reserves.
• C) the market will determine the interest rate.
• D) they will have to control the domestic rate of inflation or it won't work.

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Definitions:

Returns to Shareholders

The gains earned by shareholders on their investments in a corporation, typically in the form of dividends and stock price appreciation.

WACC

Stands for Weighted Average Cost of Capital; it represents the average rate of return a company is expected to pay its security holders to finance its assets.

Business Risks

The exposure a company or organization faces from factors that may affect its ability to achieve its objectives or financial goals.

Financial Risks

The risk of experiencing financial loss from an investment or entrepreneurial activity.