Which One of the Following Statements Is the MOST Accurate

question 5

Multiple Choice

Which one of the following statements is the MOST accurate?

• A) A rise in the interest rate offered by dollar deposits causes the dollar to appreciate.
• B) A rise in the interest rate offered by dollar deposits causes the dollar to depreciate.
• C) A rise in the interest rate offered by dollar deposits does not affect the U.S. dollar.
• D) For a given euro interest rate and constant expected exchange rate, a rise in the interest rate offered by dollar deposits causes the dollar to appreciate.
• E) A rise in the interest rate offered by the dollar causes the euro to appreciate.

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Definitions:

Margin Of Safety

A financial ratio that measures the difference between actual sales and the break-even point, indicating the cushion a company has before incurring a loss.

Break-Even Sales

The point at which total revenues equal total costs, resulting in zero profit.

Operating Leverage

A financial metric that measures the degree to which a firm or project can increase operating income by increasing revenue.

Net Operating Income

A company's revenue minus its operating expenses, excluding taxes and interest, indicating the profitability of its core business activities.