Question

How the depreciation of the Australian dollar against the US dollar would affect the return to a US company that invested in an Australian money market security.

Select one:

a.
US company’s return will be higher

b.
US company’s return will be lower

c. Australian company’s return will be higher

d. Australian company’s return will be lower

Answer 1

When the United States company will be investing into the Australian money market security, and when there will be a depreciation of Australian dollar against the United States dollars, it will mean that there will be depreciation of the overall rate of return of the United States company because their exposure is in the Australian Dollars,and if the Australian dollar is going to depreciate it will mean that their overall return of Us company is also going to depreciate.

hence it can be said that the United States company's return is going to be lower.

Correct answer will be option (B) United States company's return will be lower