Question

If the rate of U.S. Treasury notes were to rise suddenly, the dollar would likely? A....

If the rate of U.S. Treasury notes were to rise suddenly, the dollar would likely?

A. Depreciate

B. Appreciate

C. Not change

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Answer #1

a) Deperciate

US Treasury note is essentially a promissing note that the US Treasury issues to an investor so that they can buy treasury nots in exchange for a loan.At the maturity, the government will pay principle on the loan plus the interest accrued on this . When denamd exceeds supply of treasury notes,then yiels on treasury notes decreases. SO risk also reduces.

The yield on US Treasuries go lower, so United States sre very much sure to pay back its debts and control its finance. So they wants to buy some us doller by selling their currency. As more people buy dollers, the doller increases its value relative to other currency . When yielsds on treasury notes increases then doller depreciate.

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