1. Suppose that a U.S. firm converts dollars into pounds in order to invest in a
ID: 1161307 • Letter: 1
Question
1. Suppose that a U.S. firm converts dollars into pounds in order to invest in a British enterprise in the U.K. A year later, the return on the investment is 12 percent in terms of pounds. If, during that period, the dollar appreciated against the pound, then the return on the investment in dollar terms would be
A. greater than 12 percent.
B. also 12 percent.
C. less than 12 percent.
D. dependent on the inflation rate, not the exchange rate.
2. Answer the question on the basis of the following five data sets, wherein it is assumed that the variable shown on the left is the independent variable and the one on the right is the dependent variable. Assume in graphing these data that the independent variable is shown on the horizontal axis and the dependent variable on the vertical axis.
50
Refer to the data sets. The vertical intercept is negative for
A. data sets 1 and 5 only.
B. data sets 1 and 3 only.
C. data sets 2 and 4 only.
D. none of the data sets.
A. greater than 12 percent.
B. also 12 percent.
C. less than 12 percent.
D. dependent on the inflation rate, not the exchange rate.
Explanation / Answer
1)
Dollar was converted into Pound and investment was made in UK. Return on investment is 12 % but in course of time, dollar appreciated. Hence, when pound is converted into dollar, less amount shall be recieved. Hence, return on investment would be less than 12 %.
Right answer is (C)
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