Which of the following does not explain why a peso today is worth more than a peso to be received in the future? a. the peso can be invested today and earn interest. b. peso may not be in demand in the future. c. there is risk of nonpayment in the future. d. inflation will reduce purchasing power of a future peso.

Which of the following does not explain why a peso today is worth more than a peso to be received in the future? a. the peso can be invested today and earn interest. b. peso may not be in demand in the future. c. there is risk of nonpayment in the future. d. inflation will reduce purchasing power of a future peso.

International Financial Management

14th Edition

ISBN:9780357130698

Author:Madura

Publisher:Madura

Chapter9: Forecasting Exchange Rates

Section: Chapter Questions

Problem 3SBD

See similar textbooks

Similar questions

Which of the following is not a factor in explaining why the present value of a future dollar is less than one dollar?A. InterestB. Inflation C. Risk of failure to receive expected cash inflows D. Historic cost
An increase in the current account deficit will place ____ pressure on the home currency value, other things equal. A. upward B. downward C. no D. upward or downward (depending on the size of the deficit)
Compound interest can best be described as: a. interest earned on the original principal b. the discount rate c. interest on interest only d. interest on interest and interest on original principal When we consider the time value of money, a peso received in the future: a.is worth less than a peso received today b. is worth more than a peso received today c. is worth the same as a peso received today d. depends on the compounding used to determine the relationship to a peso received today
Which would indicate that hyperinflation exists? a. Sales on credit are at lower prices than cash sales. b. Inflation is approaching or exceeds 20% per year. c. Monetary items do not increase in value. d. People prefer to keep their wealth in nonmonetary assets or a stable foreign currency.
If the U.S. Treasury deposits income tax receipts into its account at the Federal Reserve, then a. the money multiplier will decrease b. the money multiplier will increase c. the monetary base will decrease d. the monetary base will increase Expected inflation can be estimated as a. the return on a TIPS bond b. the return on a Treasury bond c. the return on a TIPS bond minus the return on a Treasury bond d. the return on a Treasury bond minus the return on a TIPS bond A decrease in the expected return on stocks will a. shift the demand curve for bonds leftwards b. shift the demand curve for bonds rightwards c. shift the supply curve for bonds leftwards d. shift the supply curve for bonds rightwards Which of the following is part of M2? a. Small time deposits b. Money market mutual funds c. Currency held by foreigners d. All of the above
Why is the present value of an amount lesser than its value that is to be received (paid) in the future? a.Deflation causes investors to lose purchasing power when their pesos are invested for greater than one year. b.Investors have the opportunity to earn positive rates of return, so any amount invested today should grow to a larger amount in the future. c.Investments generally are not as good as those who sell them suggest, so investors usually are not willing to pay full face value for such investments, thus the price is discounted. d.Because investors are taxed on the income received from investments they never will buy an investment for the amount expected to be received in the future. e.None of the choices is a correct answer.
If the euro depreciates against the U.S. dollar, can a dollar buy more or fewer euros as aresult? Explain.
what are the reason that the value of a dollar tomorrow is not the same as the value of a dollar today?
Which of the following statements about the time value of money is true? a.) A dollar in hand today is worth less than a dollar to be received in the future. b. ) The value of a dollar invested at a positive interest rate decreases over time. c.) The further in the future you receive a dollar, the less it is worth today. d.)The higher the rate of interest, the more likely an investor will elect to consume at present and forgo invest his funds.
Mexican interest rates are normally substantially higher than U.S. interest rates. What does this imply about the forward rate as a forecast of the future spot rate? Does the forward rate reflect a forecast of appreciation or depreciation of the Mexican peso? Explain how the degree of the expected change implied by the forward rate forecast is tied to the interest rate differential. Do you think that today’s forward rate or today’s spot rate of the peso provides a better forecast of the future spot rate of the peso?
All other things being equal, which of the following would cause interest rates to rise? a. The economy slides into a recession. b. The federal government's budget deficit declines. c. The rate of inflation decreases. d. The Federal Reserve contracts the money supply.
Why is a dollar today worth less than a dollar sometime in the future?