The Rate of Inflation in All of the World's Currency

question 28

Multiple Choice

the rate of inflation in all of the world's currency markets rises from 5% to 7%, this will tend to make forward exchange rates move toward

• A) smaller premiums or larger discounts in relation to the dollar
• B) larger premiums or smaller discounts in relation to the dollar
• C) no change on average
• D) parity

---

Definitions:

Present Value

The monetary value in present terms of a sum of money to be received later or a flow of cash, using a defined return rate.

Compounding

Compounding is the process in which an asset's earnings, from either capital gains or interest, are reinvested to generate additional earnings over time.

Time Period

A length or duration of time during which events occur or conditions exist, often used in financial contexts to specify the term of analysis or investment.