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:

Vertical

In a business context, it refers to a market or industry where the supply chain of a company is focused on providing a specific niche of products or services.

Strategic Benefits

Advantages that accrue to an organization through the implementation of strategies that improve competitiveness and ensure the achievement of goals.

Competitive Benefits

Advantages offered by a company to its employees that go beyond the standard benefits package, designed to attract and retain talent by meeting or exceeding what competitors offer.

Financial Benefits

Advantages gained in monetary terms, such as increased revenue, cost savings, or improved profit margins.