If Covered Interest Arbitrage Opportunities Do Not Exist

question 26

Multiple Choice

If covered interest arbitrage opportunities do not exist,

• A) interest rate parity does not hold.
• B) interest rate parity holds.
• C) arbitragers will be able to make risk-free profits.
• D) interest rate parity does not hold, and arbitragers will be able to make risk-free profits.
• E) interest rate parity holds, and arbitragers will be able to make risk-free profits.

---

Definitions:

Chronological Context

Refers to understanding events or information in the order that they occurred, considering the timing and sequence for clarity and analysis.

Social Context

The environment of people, cultures, institutions, and norms that surround and influence the behavior, actions, and interpretations of individuals or groups.

Physical Context

The tangible or environmental conditions in which an event occurs or an object exists.

Adhocracy Culture

An organizational culture emphasizing flexibility, employee empowerment, and an emphasis on innovation rather than hierarchical structure.