The Spot Rate Between the U

question 78

Multiple Choice

The spot rate between the U.K. and the U.S. is £0.6789 = $1, while the 1-year forward rate is £0.6782 = $1. The risk-free rate in the U.K. is 3.1 percent. The risk-free rate in the U.S. is 2.9 percent. How much profit can you earn on a loan of $2,000 by utilizing covered interest arbitrage?

• A) -$4.09
• B) -$2.78
• C) $3.15
• D) $6.13
• E) $8.55

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Definitions:

Naloxone

A medication primarily used to counteract opioid overdoses, quickly restoring normal respiration to a person whose breathing has slowed or stopped.

Analgesic Effect

The ability of a substance to reduce or eliminate pain without causing loss of consciousness, often attributed to drugs like analgesics or painkillers.

Opioid Receptor Sites

Specific areas in the brain and nervous system where opioid drugs bind, influencing pain perception and generating effects like pain relief, sedation, and euphoria.

Mu

The 12th letter of the Greek alphabet, often used in science and mathematics as a symbol for various quantities.