Which of the Following Statements Is False?​

question 31

Multiple Choice

Which of the following statements is false?​

• A) ​If interest rate parity exists, covered interest arbitrage is not worthwhile.
• B) ​If interest rate parity holds and the forward rate is an accurate forecast of the future spot rate, an uncovered investment in a foreign security is not worthwhile.
• C) ​If interest rate parity exists and the forward rate is an unbiased forecast of the future spot rate, an uncovered investment in a foreign security will on average earn an effective yield similar to an investment in a domestic security.
• D) ​If interest rate parity exists and the forward rate is expected to underestimate the future spot rate, an uncovered investment in a foreign security is expected to earn a lower effective yield than an investment in a domestic security.

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Definitions:

Intellectual Property Rights

Legal rights granted to inventors and creators to protect their inventions and creative works from unauthorized use.

Civil Law System

A legal system based on written codes and statutes, as opposed to common law, which is based on precedent decisions and judicial rulings.

Statutory Code

A legal framework enacted by a legislative body that governs a specific set of laws, often arranged by subject.

Seventh Amendment

A provision of the U.S. Constitution that guarantees the right to a jury trial in certain civil cases, according to federal law.