Suppose That the Three-Months Interest Rate in New York Is

question 16

Multiple Choice

Suppose that the three-months interest rate in New York is 4 percent and the three-Months interest rate in London is 3 percent, and that the spot rate is $2.00/£1 and the Three-months forward rate is $2.10/£1. In this situation, there is an incentive for short-Term interest arbitrage funds to flow

• A) from New York to London.
• B) from London to New York.
• C) neither from New York to London nor from London to New York.
• D) from New York to London, from London to New York, or in neither direction -Cannot be determined without more information.

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Definitions:

Eustress

A positive form of stress that can motivate individuals and improve their performance.

Stress Generates

The process by which situations, thoughts, or pressures lead to stress.

Winning Contract

A successful agreement or deal achieved after a competitive process or negotiation.

Emotional Intelligence

The ability to understand, manage, and express one's own emotions, as well as to engage in interpersonal interactions with wisdom and empathy.