The Implied Foreign Interest Rate Computed Using Spot and Forward

question 49

Multiple Choice

The implied foreign interest rate computed using spot and forward exchange rates may be lower than the actual foreign interest rate if the foreign country has a high ________.

• A) default risk
• B) inflation risk
• C) depreciation risk
• D) none of the above

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Definitions:

Personal Liability

An individual's legal responsibility for financial or legal obligations, making them personally accountable for the fulfillment of these duties.

Adoption

The legal process of taking another's child into one's family, granting it the same legal rights and status as one's biological child.

Preferred Stock

A class of stock that carries with it the right to receive payment of dividends and/or the distribution of assets on the dissolution of the corporation before other classes of stock receive their payments.

Dividends

Net profits, or surplus, set aside for shareholders.