The Interest Rate Parity Approximation Formula Is

question 84

Multiple Choice

The interest rate parity approximation formula is:

• A)F_t = S₀ * [1 + (R_FC + R_US)]^t.
• B)F_t = S₀ * [1 - (R_FC - R_US)]^t.
• C)F_t = S₀ *[1 + (R_FC - R_US)]^t.
• D)F_t = S₀ *[1 + (R_FC * R_US)]^t.
• E)F_t = S₀ * [1 - (R_FC + R_US)]^t.

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Definitions:

Production Possibilities Frontier

A curve that illustrates the maximum feasible amount of two goods that can be produced with given resources and technology.

Opportunity Cost

The financial setback of forgoing the next highly regarded alternative when determining a course of action.

Technological Advance

Improvements and innovations in technology that increase productivity, efficiency, and economic output.

Machine-making Industry

A sector of the economy focused on the manufacturing and maintenance of machines and mechanical equipment.