If Covered Interest Arbitrage Opportunities Do Not Exist

question 26

Multiple Choice

If covered interest arbitrage opportunities do not exist,

• A) interest rate parity does not hold.
• B) interest rate parity holds.
• C) arbitragers will be able to make risk-free profits.
• D) interest rate parity does not hold, and arbitragers will be able to make risk-free profits.
• E) interest rate parity holds, and arbitragers will be able to make risk-free profits.

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Definitions:

Eidetic Imagery

The rare ability to recall images, sounds, or objects in memory with high precision for a brief period after only a few instances of exposure.

Analogy

A comparison between two things, typically for the purpose of explanation or clarification.

Photograph

A picture made using a camera, where light is captured and recorded on a light-sensitive surface.

Sensory Memory

The shortest-term element of memory, it is the ability to retain impressions of sensory information after the original stimuli have ended, acting as a buffer for stimuli received through the senses.