If Interest Rate Parity Exists and Transactions Costs Are Zero

question 2

Multiple Choice

If interest rate parity exists and transactions costs are zero, the hedging of payables in euros with a forward hedge will ____.

• A) have the same result as a call option hedge on payables
• B) have the same result as a put option hedge on payables
• C) have the same result as a money market hedge on payables
• D) require more dollars than a money market hedge
• E) A and D

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Definitions:

Legitimizing Myths

Explanations used to justify why people in power deserve to be in power.

Self-Interest

The consideration of one's own advantages or well-being above those of others or the collective.

Vision

The faculty or state of being able to see, as well as the perception of the environment and the ability to interpret the surrounding visuals.

Leisure

refers to free time spent away from business, work, domestic chores, and education, as well as necessary activities such as eating and sleeping.