You Decide to Work in London (UK)for the Next 5

question 57

Multiple Choice

You decide to work in London (UK) for the next 5 years, accumulate some savings, then move back to Canada and convert your savings from British pounds to Canadian dollars.At the time of your move, economists predict that consumers in Canada have lost their affinity for British products, and expect that this declining preference for British products will continue for the next decade.How should this influence your decision to work and save in London?

• A)You should be discouraged since the declining Canadian preference for British goods should increase the value of the pound compared to the Canadian dollar, which would decrease the value of your savings when converted to Canadian dollars.
• B)You should be discouraged since the declining Canadian preference for British goods should decrease the value of the pound compared to the Canadian dollar, which would decrease the value of your savings when converted to Canadian dollars.
• C)You should be encouraged since the declining Canadian preference for British goods should decrease the value of the pound compared to the Canadian dollar, which would raise the value of your savings when converted to Canadian dollars.
• D)You should be encouraged since the declining Canadian preference for British goods should increase the value of the pound compared to the Canadian dollar, which would raise the value of your savings when converted to Canadian dollars.

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Definitions:

Maturity Matching

A financial strategy that involves matching the duration of assets and liabilities to mitigate risk.

Financing

The act of supplying capital for enterprise operations, acquisitions, or investment purposes.

Duration

A measure of the sensitivity of the price of a bond or other debt instrument to changes in interest rates, often indicating the bond's price volatility.

Red Herring

In financial contexts, a red herring is a preliminary prospectus filed by a company with the SEC, usually in connection with an initial public offering, containing important information but lacking details on price and offering size.