Covered Interest Arbitrage Involves Both

question 70

Multiple Choice

Covered interest arbitrage involves both

• A)the purchase of a foreign asset and a forward contract in the market for foreign exchange.
• B)the purchase of a domestic asset and a spot contract in the market for foreign exchange.
• C)the sale of a foreign asset and the purchase of a forward contract in the market for foreign exchange.
• D)the sale of domestic stocks and the purchase of foreign bonds.

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Definitions:

Antedated Checks

Checks written with a date earlier than the actual date of writing, often used in accounting to reflect a transaction that occurred at an earlier time.

Postdated Checks

Checks written with a future date, implying they cannot be cashed or deposited until that date arrives.

Insufficient Funds

A situation where one's bank account does not have enough money to cover checks or electronic transfers made against it, potentially resulting in a bounced check or declined transactions.

Drawer's Account

In financial terms, the account belonging to the person who writes a check or draft instructing a bank to pay a designated amount of money.