A Persistent Shortage of Yen at a Given Fixed Exchange

question 122

Multiple Choice

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

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

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Definitions:

Capital Structure

The combination of a company's long-term debt, particular short-term debt, common equity, and preferred equity, taken into account for funding its total operations and expansion.

Equity Issue

An equity issue is the release of new shares by a company to the public or certain investors to raise capital.

Debt Outstanding

The total amount of debt that a company or government has yet to repay.

Capital Budgeting

The process of evaluating and selecting long-term investments that are consistent with the firm's goal of wealth maximization.