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Interest Rate Parity Tells Us That the Cost of Buying

question 74

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Interest rate parity tells us that the cost of buying yen forward is exactly the same as the cost of borrowing dollars,buying yen in the spot market,and leaving them on yen deposit.


Definitions:

Market Value

The current trading price for a service or asset in the open market.

Book Value

The net value of a company's assets minus its liabilities, as recorded on the balance sheet, often compared to its market value to assess if it's under or overvalued.

Retained Earnings

The portion of a company's profit that is held back and not distributed to shareholders in order to reinvest in the business or pay off debt.

Stock Dividend

A dividend payment made to shareholders in additional shares rather than in cash, effectively redistributing a portion of the company's retained earnings as additional stocks.

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