Assume the Annual British Interest Rate Is Above the Annual

question 43

Multiple Choice

Assume the annual British interest rate is above the annual U.S. interest rate. Also assume the pound's forward rate of $1.75 equals the pound's spot rate. Given this information, interest rate parity ____ exist, and the U.S. firm ____ lock in a lower financing cost by borrowing pounds for one year.

• A) does; could
• B) does; could not
• C) does not; could not
• D) does not; could

Understand the significance of the feasible solution area in linear programming problems.

Understand the importance of only including relevant costs and benefits in project analysis.

Identify what constitutes an incremental cash flow for the purposes of capital budgeting.

Recognize that sunk costs and expenses not directly related to the project should not influence the project's cash flow analysis.