If Interest Rate Parity Exists, and Transaction Costs Do Not

question 50

True/False

If interest rate parity exists, and transaction costs do not exist, the option hedge will yield the same results as no hedge.

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Definitions:

Plate Boundary

The edges where two tectonic plates meet, which can be divergent, convergent, or transform, leading to various geological phenomena such as earthquakes and volcanic activity.

Oceanic Transform Plate Boundary

This is a type of plate boundary where two tectonic plates slide past each other horizontally, often causing earthquakes.

Mid-Ocean Ridge

An underwater mountain range, formed by plate tectonics, that encircles the globe.

Oceanic Trench

Deep and narrow depressions in the ocean floor, formed by the subduction of one tectonic plate under another.