The Figure Given Below Depicts the Foreign Exchange Market for British

question 48

Multiple Choice

The figure given below depicts the foreign exchange market for British pounds traded for U.S. dollars.Figure 22.2

-Assume a one year U.S. bond pays 4.0% interest and a similar U.K. bond pays 5.2% interest. Which of the following changes will establish interest rate parity?

• A)The British pound would be expected to appreciate by 1.2% against the U.S. dollar.
• B)The U.S. dollar would be expected to depreciate by 1.2% against the British pound.
• C)The British pound would be expected to depreciate by 1.2% against the U.S. dollar.
• D)The British pound would be expected to appreciate by 9.2% against the U.S. dollar.
• E)The U.S. dollar would be expected to appreciate by 9.2% against the British pound.

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Definitions:

Teamwork

Collaborative effort of a group to achieve a common goal or to complete a task in the most effective and efficient way.

Specialist Role

A specific position requiring expertise in a particular area or field.

Group

A collection of people who interact with one another and are working toward some common purpose; a team approaches being a supergroup

Shaper Role

In team dynamics, the role of pushing a team towards action and shaping the direction of the team's work.