The Problem of Currency Mismatch of Net External Wealth Can

question 137

Multiple Choice

The problem of currency mismatch of net external wealth can be mitigated by:

• A) ensuring the creditor countries always denominate loans in U.S. dollars.
• B) promoting internal financial markets where foreign securities can be traded.
• C) restricting borrowing yet encouraging lending.
• D) piling up large stocks of foreign currency assets in central bank reserves and sovereign wealth funds.

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Definitions:

Effective-interest Amortization

A method of amortizing the premium or discount on bonds payable that reflects the periodic interest expense based on the bond's carrying value.

Interest Expense

Expenses related to the borrowing of money by an entity during a certain period.

Issue Price

The price at which a new issue of securities is offered to the public.

Straight-line Method

A method of calculating depreciation or amortization by evenly spreading the cost of an asset over its useful life.