If Interest Rate Parity Exists, and the Forward Rate Is

question 1

Multiple Choice

If interest rate parity exists, and the forward rate is an accurate estimator of the future spot rate, the foreign financing rate will be ____ the home financing rate.

• A)lower than
• B)greater than
• C)similar to
• D)none of the above

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Definitions:

Price Cut

A reduction in the selling price of goods or services, often to attract more customers or boost sales.

Consumers Spend

The total amount of money expended by consumers on goods and services within a specific time period.

Total Revenue

The total receipts a firm obtains from the sale of goods or services, calculated as the quantity sold multiplied by the price.

Declines

Situations where quantities, values, or levels decrease over a period.