Suppose That the U

question 143

Multiple Choice

Suppose that the U.S. interest rate is 5 percent and the Turkish interest rate is 50 percent. The effect of this difference in the foreign exchange market is that

• A) financial capital stops moving.
• B) an American investor is guaranteed to make an additional 45 percent in dollar terms by investing in Turkey.
• C) investors expect the Turkish currency to rise in value (appreciate) against the dollar.
• D) investors expect the Turkish currency to fall in value (depreciate) against the dollar.

---

Definitions:

Par Value

The nominal or face value of a bond, share of stock, or other security, typically set at the time it is issued.

Fair Value

An estimate of the market value of an asset or liability, reflecting what a willing buyer would pay a willing seller in an arm's length transaction.

Stock Issuance Costs

Expenses associated with the issuing of new shares of stock, including legal, accounting, and underwriting fees.

Additional Paid-in Capital

The amount investors pay in excess of the par value for shares, reflecting the additional investment made by shareholders over the minimum required.