​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:

Neutral

Impartial or unbiased; not favoring one side more than another.

Positive Letters

Written communications that convey good news, congratulations, or other positive messages to the recipient.

Goodwill Expression

Communication intended to create or maintain positive relationships, often demonstrating kindness or friendliness.

Generate Goodwill

The act of fostering a positive image and favorable perception among customers, stakeholders, or the public through beneficial actions.