Covered Interest Arbitrage Moves the Market ________ Equilibrium Because ________

question 55

Multiple Choice

Covered interest arbitrage moves the market ________ equilibrium because ________.

• A) toward; purchasing a currency on the spot market and selling in the forward market narrows the differential between the two
• B) toward; investors are now more willing to invest in risky securities
• C) away from; purchasing a currency on the spot market and selling in the forward market increases the differential between the two
• D) away from; demand for the stronger currency forces up interest rates on the weaker security

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Definitions:

Cultural Interpretation

The process of understanding and evaluating behaviors, values, and beliefs within the context of a specific culture.

Empathic

The capacity to understand and share the feelings of another person, often leading to compassionate action.

Touch

The physical sensation perceived when something comes into contact with the skin, one of the five senses.

Nonverbal Communication

The process of conveying messages and meanings without the use of spoken or written words, through facial expressions, gestures, and body language.