Which one of the following statements is correct assuming that exchange rates are quoted as units of foreign currency per euro?
A) The exchange rate moves opposite to the value of the euro.
B) The exchange rate rises when the eurozone inflation rate is higher than the foreign
Country's.
C) When a foreign currency appreciates in value it strengthens relative to the euro.
D) The exchange rate falls as the euro strengthens.
E) The exchange rate is unaffected by differences in the inflation rates of the two countries.
Correct Answer:
Verified
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A)eliminates covered interest arbitrage opportunities.
B)exists
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A)London Interbank Offer
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