The Interest Rate Parity Theorem Implies That by Hedging in the Forward

question 75

True/False

The interest rate parity theorem implies that by hedging in the forward exchange rate market, an investor realises the same returns whether investing domestically or in a foreign country.

---

Definitions:

Return on Equity

A measure of a corporation's profitability, calculated as net income divided by shareholder's equity.

Debt-Equity Ratio

A financial metric used to evaluate a company's leverage, by calculating the division of its total debts by the equity of its investors.

Net Income

The total earnings of a company after all expenses and taxes have been deducted from revenue.

Times Interest Earned

A financial metric indicating how many times a company can cover its interest payments with its earnings before interest and taxes.