If UK Interest Rates Are Higher Than Japanese Interest Rates, Then

question 15

Multiple Choice

If U.K. interest rates are higher than Japanese interest rates, then the theory of covered Interest arbitrage would suggest that, in the pound/yen exchange markets, the yen would Be at a forward __________ and the pound would __________.

• A) discount; be at a forward premium
• B) discount; also be at a forward discount
• C) premium; also be at a forward premium
• D) premium; be at a forward discount

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Definitions:

Dishonor Of Note Receivable

Occurs when a promissory note's maker fails to make the scheduled payment to the note's holder when due.

Accounts Receivable

Amounts of money owed to a company by its customers for goods or services that have been delivered but not yet paid for.

Allowance For Doubtful Accounts

A contra-asset account used to estimate the portion of accounts receivable that is expected not to be collectible due to credit sales.

IFRS

International Financial Reporting Standards, a set of global accounting standards for financial reporting.