Which of the Following Is Not True Regarding Covered Interest

question 90

Multiple Choice

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

• A)Covered interest arbitrage is a reason for observing interest rate parity (IRP).
• B)If the forward rate is equal to the spot rate, conducting covered interest arbitrage will yield a return that is exactly equal to the interest rate in the foreign country.
• C)When interest rate parity holds, covered interest arbitrage is not possible.
• D)When interest rate disparity exists, covered interest arbitrage may not be profitable.
• E)All of the above are true.

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Definitions:

Anterior Pituitary

The front portion of the pituitary gland that secretes hormones affecting growth, metabolism, and reproductive functions.

Adrenal Glands

Endocrine glands located above the kidneys that produce hormones such as adrenaline and cortisol, involved in stress responses.

Pancreas

A glandular organ in the digestive system and endocrine system which secretes digestive enzymes and hormones such as insulin.

Posterior Pituitary

An extension of the brain located at the base of the skull responsible for the secretion of hormones like oxytocin and vasopressin.