Examlex

Solved

If a Foreign Country's Interest Rate Is Similar to the UK

question 1

Multiple Choice

If a foreign country's interest rate is similar to the UK rate, the forward rate premium or discount will be ____, meaning that the forward rate and spot rate will provide ____ forecasts.


Definitions:

Capital Market Line

A line used in the Capital Asset Pricing Model to illustrate the rates of return for efficient portfolios depending on the level of risk free rate and the level of market risk.

Market Portfolio

A theoretical portfolio that includes all assets in the market, with each asset weighted according to its market capitalization.

Risk Aversion

This concept describes an investor's preference to minimize uncertainty or to avoid risk in their investment decisions.

Risk-Free Rate

An anticipated gain from an investment devoid of financial risk, frequently illustrated through the returns on state bonds.

Related Questions