Question: Answer all three please Several factors affect the exchange rate of a currency with another currency. Which of the following statements are true about the
Answer all three please
Several factors affect the exchange rate of a currency with another currency. Which of the following statements are true about the factors that have an impact on exchange rates? Check all that apply. When interest rates decrease in a country, its currency's value tends to decrease because domestic investors convert their home currency into other currencies to invest in these higher yielding securities. If the demand for a currency increases, the currency's value will decrease relative to other currencies. If a country experiences greater inflation than its trading partners, the value of its currency decreases over time relative to the value of its partners' currencies X If a government intends to let its currency's value fall relative to other currencies, it will sell its currency from e market. The relationship between interest rates and exchange rates can be represented through the concept of interest rate parity. Consider the following: An American investor is considering investing $1,000 in default-free 90-day Japanese bonds that promise a 5% annual nominal return. . The spot exchange rate is 102.19 per dollar The 90-day forward exchange rate is 100.66 per dollar. The investor's annualized return on these bonds-if he or she can lock in the dollar return by selling the foreign currency in the forward market-will be Which of the following statements is implied by interest rate parity theory? An investment in one's home country should have the same return as a similar investment in a foreign country O A product bought in one country should have the same price in other countries, adjusted for exchange rate O If two countries have the same inflation rate, they should have the same interest rate, too O Interest rates in all countries with the same political risk should be the same
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