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Riskless domestic debt is an equivalent instrument to riskless foreign debt TRUE or FALSE

Riskless domestic debt is an equivalent instrument to riskless foreign debt

TRUE or FALSE

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Answer #1

FALSE.

Riskless Domestic Debt is not same as Rskless Foreign Debt becuase the Foreign Debt or any foreign security is exposed to curreny exchange risk. At the time of redemption, the change/ fluctuation in the foreign currency from purchase to the maturity may be unfavourable i.e. may reduce profits and moreover results in losses. Riskless Domestic Debt are not exposed to any fluctuation in currencies. So, they are not same.

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