A Firm That Buys Foreign Exchange in Order to Take

question 54

Multiple Choice

A firm that buys foreign exchange in order to take advantage of higher foreign interest rates is

• A)speculating.
• B)demonstrating purchasing power parity.
• C)engaging in interest rate arbitrage.
• D)responding to fluctuations in the business cycle.
• E)ignoring the nominal rate of exchange.

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Definitions:

Legal Entity

is an organization or entity that has legal rights and obligations, including the capability to enter into contracts and loans, sue, and be sued.

Merger

The combination of two or more companies into a single entity, usually to achieve synergies or improve competitive positioning.

Consolidation

The process of combining assets, liabilities, and other financial items of two or more entities into one. In financial accounting, it refers to the aggregation of financial statements of a group company as consolidated accounts.

Combining Firms

The process of merging two or more companies into one entity, typically to achieve synergies or strategic objectives.