If Interest Rate Parity Does Not Hold, and the Forward

question 9

Multiple Choice

If interest rate parity does not hold, and the forward ____ is ____ the interest rate differential, then foreign financing with a simultaneous hedge of that position in the forward market results in higher financing costs than those of domestic financing.

• A) premium; higher than
• B) discount; higher than
• C) premium; less than
• D) premium; higher than AND discount; higher than

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Definitions:

Inca Quipus

A recording system used by the Incas, consisting of various colored threads knotted in different ways to represent numbers and possibly narrative information as well.

Phonetic Emulation

The process of attempting to accurately reproduce or mimic the sounds of one language using the phonetic system of another.

Larynx And Epiglottis

The larynx is an organ involved in breathing, producing sound, and protecting the trachea, while the epiglottis is a flap of tissue that prevents food from entering the airways.

Pharynx

The pharynx is a muscular tube in the upper part of the throat that connects the mouth and nasal passages with the esophagus and larynx, serving as a pathway for air and food.