A Persistent Surplus of Pounds at a Given Fixed Exchange

question 189

Multiple Choice

A persistent surplus of pounds at a given fixed exchange rate (in dollars per pound) is evidence that the pound is ________ versus the dollar.This surplus can be reduced or eliminated through a ________ of the pound.

• A)undervalued; devaluation
• B)undervalued; revaluation
• C)overvalued; revaluation
• D)overvalued; devaluation

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Definitions:

Account Payable

The amount of money owed by a company to its creditors for goods or services that have been delivered or used, but not yet paid for.

Call Option

A financial contract that gives the holder the right, but not the obligation, to buy an underlying asset at a specified price within a specific time period.

Cash Flow Hedge

A financial strategy to manage the risk of cash flow fluctuations due to changes in the value of underlying assets or liabilities.

Option Expense

The cost associated with granting options, such as stock options to employees, which is recognized as an expense over the vesting period.