Which of the Following Variables Used in the Covered Interest

question 57

Multiple Choice

Which of the following variables used in the covered interest arbitrage formula are correctly defined?
I.R_FC:
Foreign country nominal risk-free interest rate
II.R_US:
U.S.real risk-free interest rate
III.F₁:
360-day forward rate
IV.S₀:
Current spot rate expressed in units of foreign currency per one U.S.dollar

• A)I and II only
• B)III and IV only
• C)I, III, and IV only
• D)II, III, and IV only
• E)I, II, III, and IV

---

Definitions:

Seed Division

In a corporate setting, the Seed Division could refer to a segment of a company focused on developing and selling seeds or a startup phase within an organization aimed at growing new business ideas.

Break-even

The point at which total revenues equal total expenses, resulting in no net profit or loss.

Sales Dollars

The total revenue generated from the sale of goods or services, expressed in monetary units.

Net Operating Income

Income from a company's core business operations, excluding expenses such as taxes, interest, and extraordinary items.