Final answer:
The Eurodollars are dollar-denominated deposits issued outside the U.S., typically less regulated, and often feature lower rates than U.S. CDs. The correct answer to what characterizes Eurodollars is 'd. all of the above'.
Eurodollar markets reflect international demand for the dollar and are influenced by U.S. interest rates and investment flows.
Therefore, the correct answer is e. a. and b. only.
Step-by-step explanation:
The student is asking about the nature of Eurodollars, which include the following characteristics:
Therefore, the correct answer to the question is 'd. all of the above'. It is important to note that Eurodollars are a critical part of international finance and trade. They help facilitate transactions between parties in different countries, and the rates offered often reflect the global demand for dollar liquidity as well as the regulatory environment in which they are issued.
When U.S. interest rates are lower, U.S. assets become less desirable compared to assets in other regions, such as the European Union, leading to a potential decrease in demand for the dollar on foreign currency markets and an increase in the supply of dollars. As a result, the dollar may depreciate against the euro. Conversely, when U.S. interest rates rise, the demand for U.S. dollars can increase to purchase U.S. government bonds, leading to a potential appreciation of the dollar against the euro.
Historically, significant investments by American corporations in Europe resulted in an overabundance of U.S. dollars internationally, causing the dollar to lose credibility and prompting countries to exchange their dollar reserves for gold or other assets.