The Figure Given Below Depicts the Foreign Exchange Market for British

question 48

Multiple Choice

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

-Assume a one year U.S. bond pays 4.0% interest and a similar U.K. bond pays 5.2% interest. Which of the following changes will establish interest rate parity?

• A)The British pound would be expected to appreciate by 1.2% against the U.S. dollar.
• B)The U.S. dollar would be expected to depreciate by 1.2% against the British pound.
• C)The British pound would be expected to depreciate by 1.2% against the U.S. dollar.
• D)The British pound would be expected to appreciate by 9.2% against the U.S. dollar.
• E)The U.S. dollar would be expected to appreciate by 9.2% against the British pound.

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Definitions:

Provincial Cabinet

Executive branch of a provincial government in countries with a federal structure, responsible for enacting policy and administering public services at the provincial level.

Federal Government

The national government of a federal country, which has certain powers at a national level over all its constituent states or provinces.

Provincial Youth Court

A court that deals with legal cases involving minors or young persons, typically focusing on rehabilitation rather than punishment.

Family Court

A specialized court dealing with cases that pertain to family matters such as divorce, child custody, and adoption.