Which of the Following Is Not True Regarding Interest Rate

question 54

Multiple Choice

Which of the following is not true regarding interest rate parity (IRP) ?

• A)When interest rate parity holds, covered interest arbitrage is not possible.
• B)When the interest rate in the foreign country is higher than that in the home country, the forward rate of that country's currency should exhibit a discount.
• C)When the interest rate in the foreign country is lower than that in the home country, the forward rate of that country's currency should exhibit a premium.
• D)When covered interest arbitrage is not feasible, interest rate parity must hold.
• E)All of the above are true.

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Definitions:

Consumer Behavior

The examination of the ways in which individuals, groups, and entities choose, purchase, utilize, and discard products, services, ideas, or experiences to fulfill their wants and needs.

Marginal Utility

The change in satisfaction or utility a consumer receives from consuming an additional unit of a good or service.

Utility-maximizing

The economic principle that individuals or firms seek to get the highest satisfaction or profit from their resources and choices.

Quantity Demanded

The total amount of a good or service that consumers are willing and able to purchase at a given price level in a market.