Question

According to the text, currency variability levels ____ perfectly stable over time, and currency correlations ____ perfectly stable over time. A. are; are not
B. are; are
C. are not; are not
D. are not; are

Answer 1

Answer:

C

Explanation:

Currency variability levels are not perfectly stable over time and currency correlations are not stable over time.

The term currency variability refers to the notion that the value of a particular currency varies over time. This tends to mean in the currency market, there is no such thing as the fact that the value of a currency is fixed as against a particular benchmark say the USD. Although there are variations, we must also know that the currency variability at a point in time is different from the currency variability at a different point in time. Hence, we can conclude that currency variability of a particular currency are not perfectly stable over time.

Currency correlations refers to how particularly a certain currency move relatively to another currency. Take for instance the USD and the GBP. Now, if they both change positively, we can say they are moving in the same direction and this indicates a positive correlation. However, due to that fact that these correlations change over time, we can conclude that these currency correlations are not stable over time