Which of the Following Statements Is False

Which of the following statements is false?

A) The covered interest parity equation states that the difference between the forward and spot exchange rates is related to the interest rate differential between the currencies.
B) By entering into a currency forward contract, a firm can lock in an exchange rate in advance and reduce or eliminate its exposure to fluctuations in a currency's value.
C) When the interest rate differs across countries, investors have an incentive to borrow in the low-interest rate currency and invest in the high interest rate currency.
D) A currency forward is usually written between two firms, and it fixes a currency exchange rate for a transaction that will occur at a future date.

Correct Answer:

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