​If Interest Rate Parity Does Not Hold and the Forward

Multiple Choice

​If interest rate parity does not hold and the forward premium exceeds the interest rate differential, foreign financing with a simultaneous forward purchase of the currency borrowed will result in an effective financing rate that is:

A) ​lower than the domestic interest rate.
B) ​higher than the domestic interest rate.
C) ​similar to the domestic interest rate.
D) ​highly variable.