Which of the Following Statements Is FALSE

question 74

Multiple Choice

Which of the following statements is FALSE?

• A)A segmented financial market has an important implication for international corporate finance: One country or currency has a higher rate of return than another country or currency, when the two rates are compared in the same currency.
• B)The rate of interest paid on government bonds or other securities in a country with a tradition of weak enforcement of property rights is likely not really a risk-free rate. Instead, interest rates in the country will reflect a risk premium for the possibility of default, so relations such as covered interest rate parity will likely not hold exactly.
• C)If the return difference in a segmented financial market results from a market friction such as capital controls, corporations can exploit this friction by setting up projects and raising capital in the high-return country/currency.
• D)Important macroeconomic reasons for segmented capital markets include capital controls and foreign exchange controls that create barriers to international capital flows and thus segment national markets.

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Definitions:

Separate Disclosures

Financial reporting requirement for specific information to be provided separately in financial statements to enhance clarity and understanding.

Profits

The financial gain obtained when the revenues generated from business activities exceed the expenses, taxes, and costs associated with sustaining the activity.

Total Losses

The sum of all expenses, debts, or damages that exceed gains and revenues.

Assets Test

A measure used to determine a company's financial stability by comparing its liquid assets against its liabilities.