Which One of the Following Occurs When Interest Rate Parity

question 46

Multiple Choice

Which one of the following occurs when interest rate parity exists between countries A and B?

• A) Country A investors are indifferent between risk-free investments in countries A and B
• B) Forward exchange rates for countries A and B must be equal for all time periods
• C) Risk-free interest rates in countries A and B must be equal
• D) Spot and forward exchange rates between the currencies of the two countries must be equal
• E) Significant covered interest arbitrage opportunities between currencies A and B must exist

---

Definitions:

Trends

Repeatable patterns taking place over time.

Numeric Data

Information that is represented in numbers, often used for statistical analysis or calculations.

Mean Average

A statistical measure calculated by dividing the sum of values in a data set by the number of values.

Numerical Data

Information that is represented in numbers, allowing for quantitative analysis.