If the exchange rate effect for Japanese bonds is negative,it means that the domestic rate of return will be greater than the U.S.dollar return.

Question

Quizplus · Accepted Answer

A negative exchange rate effect means that the value of the foreign currency (in this case, the Japanese yen) is decreasing relative to the U.S. dollar. Therefore, if an investor holds Japanese bonds denominated in yen, the return in yen will be higher than the return when converted to U.S. dollars. This implies that the domestic rate of return will be greater than the U.S. dollar return.

If the Exchange Rate Effect for Japanese Bonds Is Negative,it