If the Interest Rate Is Lower in the United States

question 47

Multiple Choice

If the interest rate is lower in the United States than in the United Kingdom, and if the forward rate of the British pound is the same as its spot rate:​

• A)U.S. investors could possibly benefit from covered interest arbitrage
• B)British investors could possibly benefit from covered interest arbitrage.
• C)neither U.S. nor British investors could benefit from covered interest arbitrage.
• D)A and B

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Definitions:

Stubby Tail

A short or abbreviated tail appearing notably compact or truncated compared to the usual length for the species.

Heuristic

A problem-solving strategy that uses a practical approach or shortcut to produce solutions that are good enough for the situation.

Algorithm

A fixed, step-by-step procedure for solving a problem or completing a task, often used in computing and mathematics.

Algorithmic Method

a systematic, step-by-step procedure or set of rules used to solve a problem or accomplish a task.