Which of the Following Statements Is FALSE

question 10

Multiple Choice

Which of the following statements is FALSE?

• A)The rate of interest paid on government bonds or other securities in a country with a tradition of weak enforcement of property rights is likely not really a risk-free rate.Instead,interest rates in the country will reflect a risk premium for the possibility of default,so relations such as covered interest rate parity will likely not hold exactly.
• B)If the return difference in a segmented financial market results from a market friction such as capital controls,corporations can exploit this friction by setting up projects and raising capital in the high-return country/currency.
• C)Important macroeconomic reasons for segmented capital markets include capital controls and foreign exchange controls that create barriers to international capital flows and thus segment national markets.
• D)A segmented financial market has an important implication for international corporate finance: One country or currency has a higher rate of return than another country or currency,when the two rates are compared in the same currency.

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Definitions:

Realized

Pertains to gains or losses that have been incurred as a result of actual transactions as opposed to those that are theoretical or projected.

Earned

Income or revenue that has been generated or received for goods sold or services provided.

Retained Earnings

The portion of net income that is not distributed to shareholders but is instead reinvested in the business or kept as a reserve for certain purposes.

Completed Contract Method

A financial accounting approach where revenue and expenses of a contract are recorded only when the contract is fully completed.