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:

Culturally Competent

The ability to understand, communicate with, and effectively interact with people across cultures.

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Behaviors and practices that are influenced or shaped by cultural beliefs, values, and norms.

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The process of applying information or principles learned from specific instances to broader or different situations.