Which of the Following Statements Is True

question 114

Multiple Choice

Which of the following statements is true?

• A) Interest rate parity indicates that the forward premium or discount should be greater than the differences in the national interest rates for securities of the same maturity.
• B) Purchasing power parity indicates that, in the long run, exchange rates adjust to reflect international differences in inflation so that the purchasing power of each currency tends to remain the same.
• C) The International Fisher Effect indicates that the nominal interest rate should be the same all over the world at all times if the market is efficient.
• D) Both B and C.

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Definitions:

Income Summary

An account used in the closing process, summarizing all revenues and expenses for a period, to transfer the net result to capital accounts.

Capital Account

A capital account is an account on a company's balance sheet that represents the equity investment of owners and shareholders.

Closing Entries

Journal entries made at the end of an accounting period to transfer the balances of temporary accounts to a permanent equity account.

General Ledger

A thorough collection of financial records that documents every financial transaction undertaken by a business.