Explain ANY one of them in detail (400 words) provide proper link to your source

Question

Explain ANY one of them in detail (400 words) provide proper link to your sources?style="font-size: 12pt;">

style="font-size: 12pt;">

1.What is the impact of the fluctuating Canadian Dollar and exchange rates?style="font-size: 12pt;">

2.What is the impact of a lower Canadian Dollar?style="font-size: 12pt;">style="font-size: 12pt;">style="font-size: 12pt;">

3.What has caused Canada%u2019s National debt to grow?style="font-size: 12pt;">

>

USE YOUR OWN WORDS
style="font-size: 12pt;">

Explanation / Answer

The impact of exchange rate movements (also known as currency risk or exchange rate risk) applies when you purchase mutual funds that hold foreign securities such as U.S. stocks.

Canadian investors typically purchase U.S. mutual funds using Canadian dollars, but in order to buy U.S. stocks and bonds, fund managers first have to convert this money to U.S. dollars.

The chart below highlights the short-term effects of exchange rate movements. Since the beginning of 2007 exchange rates have fluctuated wildly. This has been a mixed blessing for Canadians invested abroad %u2013 in 2008, a weakening Canadian dollar helped returns; while in 2009 and early 2010 a strengthening Canadian dollar hurt returns.

Exchange Rates Vary Over Time-

In addition to impacting performance from one year to the next, exchange rate movements tend to vary over time. While a rising Canadian dollar has negatively impacted Canadian investors holding U.S. dollar investments since 2003 (despite strong gains in the U.S. stock market), the opposite effect occurred throughout most of the 1990s and early 2000. (As the U.S. dollar increased relative to the Canadian dollar during the 1990s, the value of U.S. mutual funds increased when they were converted back to Canadian dollars.)

Exchange Rates Have Less Impact over the Long Term-

The example above highlights the variability in short-term exchange rate movements and the impact this can have on investment returns. However, the chart below shows how currency movements tend to have minimal impact over the long term. In fact, over periods of 15 years or longer, the impact of exchanges between the Canadian dollar and the U.S. dollar on investment returns gets closer and closer to zero %u2013 an important point for long-term investors.

Related Questions

Navigate

• Browse (All)
• Browse E
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.