Currently,a U

question 34

Multiple Choice

Currently,a U.S.trader notes that in the 6-month forward market,the Japanese yen is selling at a premium (that is,you receive more dollars per yen in the forward market than you do in the spot market) ,while the British pound is selling at a discount.Which of the following statements is CORRECT?

• A) If interest rate parity holds,6-month interest rates should be the same in the U.S. ,Britain,and Japan.
• B) If interest rate parity holds among the three countries,the United States should have the highest 6-month interest rates and Japan should have the lowest rates.
• C) If interest rate parity holds among the three countries,Britain should have the highest 6-month interest rates and Japan should have the lowest rates.
• D) If interest rate parity holds among the three countries,Japan should have the highest 6-month interest rates and Britain should have the lowest rates.
• E) If interest rate parity holds among the three countries,the United States should have the highest 6-month interest rates and Britain should have the lowest rates.

---

Definitions:

Nonrival

A characteristic of a good where its consumption by one individual does not reduce its availability to others; often associated with public goods.

Free-rider Problem

A situation where individuals consume or benefit from resources without paying for them, often leading to under-provision or depletion of those resources.

Streetlights

Outdoor lighting fixtures installed along streets to provide illumination during the night for public safety and convenience.

Nonrival

A term used to describe a good whereby one person's consumption does not hinder or reduce the ability of another person to consume the same good.