If Interest Rate Parity Does Not Hold

question 8

Multiple Choice

If interest rate parity does not hold,

• A)covered interest arbitrage opportunities will exist.
• B)covered interest arbitrage opportunities will not exist.
• C)arbitragers will be able to make risk-free profits.
• D)covered interest arbitrage opportunities will exist, and arbitragers will be able to make risk-free profits.

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Definitions:

Labour Expenses

Costs associated with compensating employees, including wages, salaries, benefits, and taxes.

Rightsizing

Adjusting the number of employees to fit the current needs of the organization, which may involve layoffs or hiring.

Layoffs

The temporary or permanent dismissal of employees from their jobs due to economic downturns, business restructurings, or other financial reasons.

Volume Efficiency

The effective management of resources to produce the maximum possible output or volume of production at the lowest cost.