Final answer:
The net asset value of an international bond fund is likely to increase if interest rates fall abroad or if the U.S. dollar weakens, making foreign investments more valuable when converted back into dollars.
Step-by-step explanation:
The net asset value of an international bond fund can be expected to increase if interest rates fall abroad. When interest rates decrease in other countries, the bonds from those countries become more valuable because their fixed payouts are now more attractive compared to new bonds issued at the new, lower rates. Conversely, if interest rates rise, then existing bonds with lower payouts become less valuable. A strengthening of the U.S. dollar generally means that U.S. investors will find foreign assets more expensive, as more dollars are required to purchase the same amount of foreign currency. Therefore, the net asset value of an international bond fund could decrease. In contrast, if the U.S. dollar weakens, the same number of dollars buys more foreign currency, which could lead to an increase in the net asset value of an international bond fund because the foreign investments would yield more when converted back into dollars.