Which of the Following Statement Is False

question 19

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:

Major Product

The product of a chemical reaction that is formed in the greatest quantity, as determined by the reaction conditions and mechanism.

HBr

Hydrobromic acid, a strong acid formed by dissolving hydrogen bromide in water, used in organic synthesis and as a catalyst.

Addition

A chemical reaction where two or more substances combine to form a single product, often involving the breaking of double or triple bonds.

Anhydrous HCl

Hydrogen chloride gas or any form of hydrochloric acid that does not contain water.