If Interest Rate Parity Exists, and Transaction Costs Do Not

question 49

Multiple Choice

If interest rate parity exists, and transaction costs do not exist, the money market hedge will yield the same result as the ____ hedge.

• A)put option
• B)forward
• C)call option
• D)none of the above

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Definitions:

Group of Underwriters

A team of financial institutions or individuals that jointly take on the risk of issuing new securities by purchasing them from the issuer and selling them to the public.

Reduce Risk

Strategies and measures employed by individuals or companies to minimize the exposure to financial loss or operational failures.

Underwriters

Organizations or individuals that assess and accept the risk of another party in exchange for a fee, typically in the context of insurance or investment banking.

Firm Commitment Underwriting

A commitment by an underwriter to buy all the unsold shares of a public offering at an agreed-upon price, thus guaranteeing the issuer that the offering will raise a certain minimum amount of capital.