How Must Currency Contracts Be Structured for a Currency Devaluation

question 17

Multiple Choice

How must currency contracts be structured for a currency devaluation to have an improvement on the balance of trade?

• A) Export contracts in domestic currency and import contracts in foreign currency
• B) Export contracts in foreign currency and import contracts in domestic currency
• C) Both contracts in domestic currency
• D) Both contracts in foreign currency

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Definitions:

Compounded Monthly

The calculation of interest paid or earned, where the interest is added to the principal balance monthly, allowing the interest to be earned on interest.

Total Interest

The sum of all interest payments made over the life of a loan or credit.

Five-Year Period

A specific timeframe of five years used for planning, investment analysis, or as a measure of time.

Compounded Monthly

Interest calculated on the initial principal and previously earned interest, recalculated every month.