The Figure Given Below Depicts the Foreign Exchange Market for British

question 85

Multiple Choice

The figure given below depicts the foreign exchange market for British pounds traded for U.S. dollars.Figure 22.2

-Assume that a one-year Malaysian bond yields 10 percent interest and that the dollar return on maturity is 5 percent. If the exchange rate at maturity is $1 = MYR 4.00 (Malaysian ringgit) , what was the exchange rate at the time the bond was purchased?

• A)$1 = MYR 4.2
• B)$1 = MYR 3.8
• C)$1 = MYR 3.6
• D)MYR 1 = $0.26
• E)MYR 1 = $0.4

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Definitions:

Foreign Currency

Currency used in a country other than one's own, often requiring exchange for domestic currency in international trade or finance.

Foreign Exchange Gain

A profit arising from a change in exchange rates when foreign currency holdings are valued at a higher rate.

Foreign Exchange Gain

A profit resulting from the appreciation of one currency against another in the foreign exchange market.

U.S. Dollars

The currency of the United States, commonly used as a standard unit of currency in international markets.