Which of the Following Is Not True Regarding Covered Interest

question 78

Multiple Choice

Which of the following is not true regarding covered interest arbitrage?​

• A)Covered interest arbitrage tends to force a relationship between the interest rates of two countries and their forward exchange rate premium or discount.
• B)Covered interest arbitrage involves investing in a foreign country and covering against exchange rate risk.
• C)Covered interest arbitrage opportunities only exist when the foreign interest rate is higher than the interest rate in the home country.
• D)If covered interest arbitrage is possible, you can guarantee a return on your funds that exceeds the returns you could achieve domestically.
• E)All of the above are true regarding covered interest arbitrage.

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Definitions:

Evolutionary Reason

An explanation for a trait, behavior, or phenomenon that is based on the principles of natural selection and adaptation.

Amygdala

A part of the brain's limbic system involved in emotion regulation, especially fear and pleasure responses.

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A situation in which too many people or objects are located within a particular space, leading to a sense of congestion or discomfort.

Authentic

Genuine or true to one's own personality, spirit, or character, often implying sincerity and integrity.