Exhibit 18-3 -Imagine That There Are Only Two Nations in the World,Canada

question 86

Multiple Choice

Exhibit 18-3

-Imagine that there are only two nations in the world,Canada and Switzerland.Which of the following is true of the suppliers and demanders in this market,as represented in Exhibit 18-3?

• A) The demanders want Canadian dollars and are offering Swiss francs.
• B) The suppliers want Canadian dollars and are offering Swiss francs.
• C) Both the suppliers and the demanders are offering Canadian dollars.
• D) Both the suppliers and the demanders are offering Swiss francs.
• E) Francs are being exchanged by unknown suppliers and demanders in a money market in Switzerland;anyone could be trading.

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Definitions:

Premium Amortization

The process of gradually writing off the initial premium paid on a bond above its par value over the life of the bond.

Bonds

Bonds are financial instruments representing a loan made by an investor to a borrower, typically corporate or governmental, which pays interest over time and returns the principal at maturity.

Effective Yield

The total yield on an investment, taking into account the compounding of interest, as opposed to just the nominal rate.

Bond Issue Costs

Expenses associated with the issuance of bonds, including legal fees, printing costs, and commissions, that are typically amortized over the life of the bonds.