If Interest Rate Parity Exists, and the Forward Rate Is

question 1

Multiple Choice

If interest rate parity exists, and the forward rate is an accurate estimator of the future spot rate, the foreign financing rate will be ____ the home financing rate.

• A)lower than
• B)greater than
• C)similar to
• D)none of the above

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Definitions:

Unemployed

The condition of not having employment while being ready to work.

Mass Unemployment

A significant and widespread condition in which a large percentage of the eligible workforce is unable to find employment.

Deflation

An economic condition characterized by a decrease in the price levels of goods and services.

Investment

The action or process of allocating resources, usually money, with the expectation of generating an income or profit.