Which of the Following Statements Is FALSE

question 23

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:

Cognitive Biases

Systematic patterns of deviation from norm or rationality in judgment, whereby inferences about other people and situations may be drawn in an illogical fashion.

Confirmation Bias

A cognitive bias that involves favoring information that confirms previously existing beliefs or biases.

Coordinate Activities

The process of organizing and harmonizing different tasks, efforts, and plans to achieve a common goal efficiently.

Interaction Process Analysis (IPA)

A method for observing and categorizing the interpersonal interactions within a small group to understand the dynamics of group behavior.