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.

---

Definitions:

Gallons

Gallons are a measure of volume primarily used in the United States, traditionally used for measuring liquids like water, gasoline, and milk.

Pounds

A unit of weight in the British imperial and United States customary systems, equal to 0.453592 kilograms.

Grams

In the metric system, it's the unit of mass equivalent to 0.001 kilograms.

Metric Tons

A unit of mass equal to 1,000 kilograms or approximately 2,204.6 pounds, commonly used in measuring weight in many countries outside the United States.