​Which of the Following Statements Is False

question 47

Multiple Choice

​Which of the following statements is false?

• A) ​If interest rate parity holds, foreign financing and a simultaneous hedge of that position in the forward market will result in financing costs similar to those in domestic financing.
• B) ​If interest rate parity holds, and the forward rate is an accurate forecast of the future spot rate, uncovered foreign financing will result in financing costs similar to those in domestic financing.
• C) ​If interest rate parity holds, and the forward rate is expected to overestimate the future spot rate, uncovered foreign financing is expected to result in lower financing costs than those in domestic financing.
• D) ​If interest rate parity holds, and the forward rate is expected to underestimate the future spot rate, uncovered foreign financing is expected to result in lower financing costs than those in domestic financing.

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Definitions:

Hot

Having a high temperature, often used in the context of describing the thermal state of magma, lava flows, or the Earth's core.

Thick

Having a large distance between opposite sides or surfaces; not thin.

Vesicles

Small cavities in volcanic rocks created by the expansion of gas bubbles during solidification of the magma.

Flow Bands

Visible layers or bands in volcanic rocks that indicate the flow direction of the magma from which the rocks formed.