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:

Legal Positivism

A school of thought in philosophy of law which holds that laws are rules made by human beings and that there is no inherent or necessary connection between law and morality.

Defamation

The act of damaging someone's good reputation through false statements, either spoken (slander) or written (libel).

Civil Law

A legal system that is based on written statutes and codes, as opposed to common law, which is based on judicial decisions and precedent.

Criminal Law

The body of law dealing with actions considered harmful or offensive against the public, society, or the state, subject to punishment such as imprisonment or fines.