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.

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Definitions:

Abrasion

The process of wearing down or rubbing away surfaces through friction, often observed in geology as rocks and sediment are eroded by water, ice, or wind.

Upflow

The upward movement of fluid, air, or other substances, which can affect environmental conditions and processes, such as in aquifers or atmospheric phenomena.

Scoured

Describes the effect of being worn down or cleaned by fast-moving water or other fluids, often related to geological surfaces.

Permafrost

A condition in which water in the uppermost part of the ground remains frozen all or most of the time.