Which of the Following Statements Is FALSE

question 17

Multiple Choice

Which of the following statements is FALSE?

• A)The covered interest parity equation states that the difference between the forward and spot exchange rates is related to the interest rate differential between the currencies.
• B)By entering into a currency forward contract,a firm can lock in an exchange rate in advance and reduce or eliminate its exposure to fluctuations in a currency's value.
• C)When the interest rate differs across countries,investors have an incentive to borrow in the low interest rate currency and invest in the high interest rate currency.
• D)A currency forward is usually written between two firms,and it fixes a currency exchange rate for a transaction that will occur at a future date.

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Definitions:

Percent Equivalent

The percentage representation of a fraction or decimal, used to compare rates, efficiencies, or proportions across different contexts.

Five-figure Accuracy

A level of precision where a number is accurate to the fifth digit.

Accurate

Characterized by preciseness and exactness in details or measurements.

Terminating Decimal

A decimal that comes to an end or has a finite number of digits after the decimal point.