If Domestic Returns Are Greater Than Foreign Returns, Then

question 5

Multiple Choice

If domestic returns are greater than foreign returns, then:

• A) the spot rate is too high.
• B) the spot rate is too low.
• C) expectations of future exchange rates will change in the long run.
• D) There is no opportunity for arbitrage.

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Definitions:

Derived Demand

Demand for a good or service that arises from the demand for another good or service, for example, the demand for steel being derived from the demand for automobiles.

Industrial Products

Goods and services designed and marketed for use in production and operations, often sold to other businesses rather than end consumers.

Consumer Products

are goods sold directly to consumers for their personal or household use.

Six-Digit Coding

A system often used in categorizing and organizing information or items, where each item is assigned a unique six-digit code.