Which of the Following Statements Is False

question 45

Multiple Choice

Which of the following statements is false?

• A) Differential access to national capital markets is common enough that it provides the best explanation for the existence of currency swaps, which are like the interest rate swap contracts, but with the holder receiving coupons in one currency and paying coupons denominated in a different currency.
• B) Currency swaps generally also have final face value payments, also in different currencies.
• C) Using a currency swap, a firm can borrow in the market where it has the best access to capital, and then "swap" the coupon and principal payments to whichever currency it would prefer to make payments in.
• D) With differential access to national markets, to maximize shareholder value, the firm should raise capital in the foreign market; the method of valuing the foreign project as if it were a domestic project would then provide the correct NPV.

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Definitions:

Measure Of Solvency

A measure of solvency is an assessment of an entity's capability to meet its long-term financial obligations, indicating its financial stability and health.

Debt To Total Assets

A financial ratio that measures the proportion of a company's assets that are financed through debt.

Working Capital

The difference between a company's current assets and current liabilities, indicating the short-term liquidity and operational efficiency of the business.

Current Liabilities

Short-term financial obligations that are due within one year or within the normal operating cycle of a business.