Under Existing Federal Statutes, Arbitrage, as It Applies to State

question 20

Multiple Choice

Under existing federal statutes, arbitrage, as it applies to state and local governments is

• A) Illegal.
• B) Illegal unless the government can demonstrate a "just cause" for engaging in it.
• C) Legal in some circumstances, but the government may be required to remit arbitrage earnings to the federal government.
• D) Illegal unless there is no more than a 2 percent difference between interest earned and interest paid.

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Definitions:

Nominal Exchange Rate

The speed at which the currency of one nation can be traded for the currency of another nation, without correction for inflation.

Trade Balance

Trade balance is the difference between the value of a country's exports and imports over a certain period, indicating the relative strength of its international trade.

Investment

The allocation of resources, often financial, into endeavors with the expectation of generating future returns.

Purchasing-Power Parity

An economic theory that compares different countries' currencies through a "basket of goods" to assess the relative value of currencies.