To Capitalize on High Foreign Interest Rates Using Covered Interest

question 15

True/False

To capitalize on high foreign interest rates using covered interest arbitrage, a U.S. investor would convert dollars to the foreign currency, invest in the foreign country, and simultaneously sell the foreign currency forward.

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Definitions:

Automatic Processes

Cognitive activities that occur with little to no conscious effort or control, such as breathing or driving a familiar route.

Conscious Behaviors

Actions that individuals are aware of doing and are able to control, typically involving thought and intention.

Controlled Processes

Activities that require conscious, deliberate thought and effort, distinguished by their high demand on cognitive resources.

Conscious Awareness

The mental state of being fully present and fully perceptible of internal and external events or experiences at the moment.