While the Federal Reserve Has Kept Interest Rates at Historic

question 108

Multiple Choice

While the Federal Reserve has kept interest rates at historic lows,many foreign central banks have begun to tighten monetary policy by raising interest rates.These actions will

• A) weaken these foreign currencies relative to each other.
• B) cause the dollar to appreciate relative to these foreign currencies.
• C) cause the foreign currencies to depreciate relative to the dollar.
• D) strengthen these foreign currencies relative to the dollar.

---

Definitions:

Currency Swap

A financial derivative product that allows two parties to exchange principal and interest in different currencies, used to hedge currency risk or obtain financing in foreign currency.

Forward Contract Payable

A financial instrument obligating the buyer to purchase an asset or the seller to sell an asset at a predetermined future date and price.

Spot Rate

The present cost at which a specific currency is available for purchase or sale, with immediate transfer.

Swiss Francs (CHF)

The currency of Switzerland, known for its strength and stability in the financial market.