If Interest Rate Parity Exists and Transactions Costs Are Zero

question 8

Multiple Choice

If interest rate parity exists and transactions costs are zero, foreign financing with a simultaneous forward purchase of the currency borrowed will result in an effective financing rate that is:

• A) less than the domestic interest rate.
• B) greater than the domestic interest rate.
• C) equal to the domestic interest rate.
• D) greater than the domestic interest rate if the forward rate exhibits a premium and less than the domestic interest rate if the forward rate exhibits a discount.

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Definitions:

Coccygeal Plexus

A network of nerve fibers located near the coccyx, involved in sensory and motor supply to pelvic regions.

Pelvic Floor

A group of muscles, ligaments, and connective tissues in the pelvic area that supports the organs of the pelvis.

Iliopsoas

A composite muscle comprised of the iliacus and psoas major muscles; it is critical for flexing the hip and bending the trunk.

Sartorius

The longest muscle in the human body, running from the hip to the knee, assisting in flexing, abduction, and lateral rotation of the thigh.