If USInterest Rates Are Expected to Be 6 Percent Next Year

question 147

Multiple Choice

If U.S.interest rates are expected to be 6 percent next year, European interest rates are expected to be 4 percent next year, and the spot rate between the euro and dollar is $1.30, then according to interest rate parity, we would expect the dollar to _________ against the euro from $1.30 to __________:

• A)appreciate, $1.275
• B)appreciate, $1.325
• C)depreciate, $1.275
• D)depreciate, $1.325

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Definitions:

Total Asset Turnover

A measure of a company's efficiency in using its assets to generate sales or revenue.

Gross Profit Percentage

A financial ratio that expresses a company's gross profit as a percentage of net sales, indicating the efficiency of production and sales activities.

Operating Expenses

Expenses incurred through normal business operations, such as salaries, rent, and utilities, excluding cost of goods sold.

Primary Operations

The main activities a company engages in that directly relate to its core business or purpose.