Which of the Following Is Not True Regarding Covered Interest

question 14

Multiple Choice

Which of the following is not true regarding covered interest arbitrage?

• A) Covered interest arbitrage tends to force a relationship between the interest rates of two countries and their forward exchange rate premium or discount.
• B) Covered interest arbitrage involves investing in a foreign country and covering against exchange rate risk.
• C) Covered interest arbitrage opportunities only exist when the foreign interest rate is higher than the interest rate in the home country.
• D) If covered interest arbitrage is possible, you can guarantee a return on your funds that exceeds the returns you could achieve domestically.
• E) All of these are true regarding covered interest arbitrage.

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Definitions:

Rising Intonation

Rising intonation is a linguistics term describing the upward pitch movement at the end of a sentence or phrase, often used in questions or to indicate uncertainty.

Sequence of Sounds

An arrangement or order of sounds in time, which can form patterns or structures, such as in music or language.

Non-Linguistic Accompaniment

Components of communication other than spoken language, including gestures, facial expressions, and other body language, that complement or enhance the message.

Paralanguage

The non-linguistic accompaniments of speech such as stress, pitch, speed, tone, pauses.