If the Forward Exchange Rate of the Yen in Terms

question 20

Multiple Choice

If the forward exchange rate of the yen in terms of dollars is greater than the spot exchange rate,

• A)Japanese interest rates must be higher than U.S. interest rates.
• B)U.S. interest rates must be higher than Japanese interest rates.
• C)market participants must be expecting the dollar to appreciate against the yen.
• D)market participants must be expecting the dollar to depreciate against the yen.

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Definitions:

Forecasts

Predictions or estimates of future events, especially concerning weather or economic trends.

Renewable Resource

A natural resource that can replenish itself naturally over time, such as solar energy, wind, and forestry.

Invisible Hand

A concept introduced by Adam Smith to describe the self-regulating nature of the market through individuals' pursuit of their own interests.

Consumption

The act of using goods and services to satisfy needs and desires.