Based on Interest Rate Parity, the Larger the Degree by Which

question 46

Multiple Choice

Based on interest rate parity, the larger the degree by which the U.S. interest rate exceeds the foreign interest rate, the:​

• A) ​larger will be the forward discount of the foreign currency.
• B) ​larger will be the forward premium of the foreign currency.
• C) ​smaller will be the forward premium of the foreign currency.
• D) ​smaller will be the forward discount of the foreign currency.

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Definitions:

General Journal

A primary accounting record used to record all financial transactions in chronological order.

Advance Premium

Payment made in advance for insurance coverage, often resulting in a discount or ensuring the policy remains active without interruption.

Workers' Compensation

An insurance scheme designed to provide medical assistance and compensate for lost wages to employees injured during their work.

General Journal

A primary accounting record where financial transactions are recorded in chronological order, before being posted to specific accounts in the general ledger.