Question
Which of the following statements is false? a. If interest rate parity exists and the forward rate is expected to underestimate the future spot rate,
Which of the following statements is false?
| a. | 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. | |
| b. | If interest rate parity exists, covered interest arbitrage is not worthwhile. | |
| c. | 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. | |
| d. | 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. |
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Introduction to Hospitality
Authors: John R. Walker
6th edition
013281465X, 978-0132814652
