Several factors affect the exchange rate of a currency with another currency. Which of the following statements are true about the factors that have an impact on exchange rates? Check all that apply when interest rates increase in a country, its currency's value tends to increase because foreign investors convert their home currency to invest in these higher yielding securities. If a government intends to prevent its currency's value from falling relative to other currencies, it will sell its currency from reserves in the market. An increase in inflation tends to lower the currency's value with respect to other currencies with lower inflation rates If the supply of a currency increases, the currency's value will decrease relative to other currencies. The relationship between interest rates and exchange rates can be represented through the concept of interest rate parity. Consider the following: Suppose you observe the following spot and forward exchange rates between the U.S. dollar ($) and the Canadian dollar (C): Spot Exchange Rate 0.8711 One-Year Forward Exchange Rate 0.8903 Canadian dollar (U.S. dollar/Canadian dollar) The current one-year interest rate on U.S. Treasury securities is 6.35%. If interest rate parity holds, what is the expected yield on one-year Canadian securities of equal risk? O 4.06% 3.45% 4.25% 3.25% Interest rate parity recognizes that when you invest in a country other than your home country, two factors affect your investment-returns on the investment itself and changes in the exchange rate. Which of the following would cause the overall return on your investment to be higher than the investment's stated return? O Your home currency appreciates relative to the currency in which the investment is denominated O The currency in which the investment is denominated appreciates relative to your home currency O The currency in which the investment is denominated depreciates relative to your home currency