If the exchange rate falls,U.S.residents pay
A)more dollars for foreign bonds and get more dollars from interest payments.
B)more dollars for foreign bonds but get fewer dollars from interest payments.
C)fewer dollars for foreign bonds and also get fewer dollars from interest payments.
D)fewer dollars for foreign bonds but get more dollars from interest payments.

Question

Quizplus · Accepted Answer

If the exchange rate falls, the value of the dollar decreases relative to foreign currencies. This means that U.S. residents will need to pay more dollars to purchase foreign bonds. However, the interest payments on these bonds will still be paid in the foreign currency, so U.S. residents will receive more dollars from these payments.

If the Exchange Rate Falls,U.S.residents Pay