The Reference to __________________ Comes from the Days When the Contract

question 3

Multiple Choice

The reference to __________________ comes from the days when the contract was literally sealed by a piece of soft wax into which an impression was made.

• A) Implied-in-fact contracts
• B) Implied-in-law contracts
• C) Contracts under wax
• D) Contracts under seal
• E) Contracts under pressure

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Definitions:

Covered Interest Arbitrage

A strategy that involves converting currency through the spot exchange market, investing in foreign interest bearing securities, and hedging exchange risk through the forward market to earn riskless profit.

Forward Rate

The predicted interest rate for a loan or investment for a specific period in the future, differing from current rates.

Nominal Risk-Free Rate

The rate of return on an investment with no risk of financial loss, not taking into account inflation.

Purchasing Power Parity

An economic theory that suggests exchange rates between currencies are in equilibrium when their purchasing power is the same in each of the two countries.