Which of the Following Might Discourage Covered Interest Arbitrage Even

question 61

Multiple Choice

Which of the following might discourage covered interest arbitrage even if interest rate parity does not exist?

• A) transaction costs
• B) political risk
• C) differential tax laws
• D) All of these are correct.

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Definitions:

Perfectly Competitive

refers to a market structure where there are many buyers and sellers, all selling identical products, with no single market participant being able to influence the market price.

Monopolistically Competitive

A market structure characterized by many firms selling similar but not identical products, with some degree of market power.

Total Broccoli Output

The aggregate amount of broccoli produced over a specified period of time.

Long-Run Equilibrium

A state in which all factors of production and outputs in an economy are fully adjusted to any changes in demand and supply, resulting in economic stability.