The effective yield of investing in a foreign currency depends on both the ____ and the ____ of the foreign currency.

Question

Quizplus · Accepted Answer

The effective yield of investing in a foreign currency depends on both the interest rates and the exchange rate movements of the foreign currency. High interest rates in a foreign currency will increase the effective yield of an investment, while exchange rate movements can either magnify or diminish the returns earned from investing in a foreign currency. Thus, options A, B, and D are incorrect because they do not include both factors that affect effective yield.

The Effective Yield of Investing in a Foreign Currency Depends