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:

Direct Materials

Raw materials and components that are directly used in the manufacturing of a product.

Inventory

Goods and materials held by a business for the purpose of resale or production.

Production Budget

A production budget is a financial plan that estimates the number of units to be produced to meet anticipated sales.

Units

A measure of quantity, such as products produced or services rendered, used in various business contexts.