If the Inflation Rate in Canada Is Greater Than the Inflation

question 33

Multiple Choice

If the inflation rate in Canada is greater than the inflation rate in Britain,other things held constant,what will happen to the British pound?

• A)It will appreciate against the Canadian dollar.
• B)It will depreciate against the Canadian dollar.
• C)It will remain unchanged against the Canadian dollar.
• D)It will appreciate against other major currencies.

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Definitions:

Annual Interest Payments

These are payments made to lenders or bondholders for the use of borrowed money, typically calculated annually based on the interest rate and principal amount.

Yield To Call (YTC)

The rate of interest earned on a bond if it is called. If current interest rates are well below an outstanding callable bond’s coupon rate, the YTC may be a more relevant estimate of expected return than the yield to maturity, since the bond is likely to be called.

Yield To Maturity (YTM)

The total return anticipated on a bond if the bond is held until its maturity date, taking into account both interest payments and the difference between the bond's current market price and its face value.

Annual Coupon Rate

A bond's yearly interest payment to its holders, expressed as a percentage of the bond's face value.