Which of the Following Is Not True Regarding Interest Rate

question 47

Multiple Choice

Which of the following is not true regarding interest rate parity (IRP) ?

• A) When interest rate parity holds, covered interest arbitrage is not possible.
• B) When the interest rate in the foreign country is higher than that in the home country, the forward rate of that country's currency should exhibit a discount.
• C) When the interest rate in the foreign country is lower than that in the home country, the forward rate of that country's currency should exhibit a premium.
• D) When covered interest arbitrage is not feasible, interest rate parity must hold.
• E) All of these are true.

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Definitions:

Greater Than

A mathematical expression indicating that one quantity is larger than another.

Z-scores

Standardized scores that measure how many standard deviations a data point is from the mean, used for comparison across different data sets or variables.

Standard Normal Distribution

A normal distribution with a mean of 0 and a standard deviation of 1.

Between

Pertaining to comparisons or analyses conducted on distinct and separate groups or categories.