One factor causing fluctuation in the exchange rate is a) interest rates. b) lack of weekend trading

6 answers
Question:

One factor causing fluctuation in the exchange rate is
a) interest rates.
b) lack of weekend trading hours.
c) insider information by arbitragers.
d) geographical dispersion of the fx market.

Answers

Your answer would be A

b

Explanation:

answer:

explanation:

yes

The correct answer is A.

Interest rate differentials between two countries affect the value of the exchange rate between the currencies of those two countries.

The country which has the largest interest rate, attracts both domestic and foreign investors, as they all want to earn a retribution as high as possible. If they invest their money in operations that promise higher interests, they would earn higher profits.

Therefore, investors from the country with lower interest rates exchange their domestic currency, increasing its supply on the monetary markets, for the foreign currency, increasing the demand of the latter in the monetary markets, in order to be able to invest in the country with more favourable interest rates. As a result of these money movements, the currency from the country with attractive interests rates appreciates against the currency of the country with less attractive rates.

The correct answer is letter A.

Explanation: Interest is the income you earn when you lend money for a specified period. Interest is to the lender (the one who has something to receive) compensation for the time it captures without using the borrowed money.

To determine the amount of interest, percentage rates (interest rates) are set by the lender.

Interest rates are calculated according to some factors such as the prevailing inflation, what was agreed in the contract or the risk of the loan to the lender.

A, it is in the sentence directly above the last sentence

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