Which of the Following Statement Is False

question 39

Multiple Choice

Which of the following statement is false?

• A) If interest rate parity holds, foreign financing a simultaneous hedge of that position in the forward market will result in financing costs similar to those in domestic financing.
• B) If interest rate parity holds, and the forward rate is an accurate forecast of the future spot rate, uncovered foreign financing will result in financing costs similar to those in domestic financing.
• C) If interest rate parity holds, and the forward rate is expected to overestimate the future spot rate, uncovered foreign financing is expected to result in lower financing costs than those in domestic financing.
• D) If interest rate parity holds, and the forward rate is expected to underestimate the future spot rate, uncovered foreign financing is expected to result in lower financing costs than those in domestic financing.

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Definitions:

Seasonal

Pertaining to or occurring during a particular season of the year, often implying changes in business activities, market demand, or weather patterns that recur annually.

Working Capital Management

The practice of managing a company's short-term assets and liabilities to ensure it has sufficient liquidity to run its operations efficiently.

Cost/Benefit Tradeoffs

The analysis or decision-making process regarding the advantages and disadvantages (costs and benefits) of a given action or investment.

Current Asset Account

A balance sheet account that represents the value of all assets that can reasonably be expected to be converted into cash within one year.