Which of the Following Statements Is False

question 21

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:

Holding Company

A corporation that owns enough voting stock in another company to control its policy and management.

Conglomerate Merger

A type of merger involving companies that are involved in totally unrelated business activities, aiming for diversification.

Horizontal Merger

A merger between companies operating in the same industry, often as competitors offering similar products or services.

Antitrust Laws

Legislation designed to promote competition and prevent monopolies by regulating the conduct and organization of business corporations, especially to promote fair competition for the benefit of consumers.