The Interest Rate Represents ________ to ________ and ________ to ________

question 74

Multiple Choice

The interest rate represents ________ to ________ and ________ to ________.

• A) profit; foreign entities; the cost of funds; savers
• B) the cost of funds; corporations; a return; governments
• C) profit; governments; the marginal rate of arbitrage; foreign entities
• D) the cost of borrowing; firms and governments; a reward to saving; households
• E) profit; arbitrage companies; loss; firms

---

Definitions:

Option Price

The price at which a specific derivative contract can be exercised, representing the cost to buy (call option) or sell (put option) an underlying asset at the strike price.

Riskless Arbitrage

An investment strategy that involves exploiting price differences of identical or similar financial instruments on different markets or in different forms.

Standard Deviation

A statistical measure that quantifies the amount of variation or dispersion of a set of data values from the mean.

Theoretical Value

The estimated price of an asset or financial instrument based on mathematical models instead of market prices, often used in options pricing.