Which of the Following Statements Is True

question 38

Multiple Choice

Which of the following statements is true?

• A) By directly matching its foreign asset and liability book, an FI can lock in a positive return on profit spread if exchange rates rise over the investment period.
• B) By directly matching its foreign asset and liability book, an FI can lock in a positive return on profit spread if exchange rates fall over the investment period.
• C) By directly matching its foreign asset and liability book, an FI can lock in a positive return on profit spread whichever direction exchange rates change over the investment period.
• D) By directly matching its foreign asset and liability book, an FI holds a neutral position, i.e. earnings equalling zero, whichever direction exchange rates change over the investment period.

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