Which of the following statements is false?
A) If the US dollar depreciates, there will be a capital loss on assets held in US dollars.
B) If US dollar depreciates, interest parity condition requires that US interest rate is higher the Canadian interest rate.
C) Appreciation of US dollars will lead to capital loss on US dollar-based assets.
D) Depreciation of Canadian dollar explains why US interest rate is lower than Canadian interest rate.

Question

Quizplus · Accepted Answer

C) is false because the appreciation of the US dollar typically leads to a capital gain on assets held in US dollars, not a loss. When the value of the US dollar increases relative to other currencies, the value of assets denominated in US dollars also increases when measured in those other currencies.

Which of the Following Statements Is False