When the Law of One Price Is Applied to Interest

question 51

Multiple Choice

When the law of one price is applied to interest rates, it suggests that:

• A) interest rates do not differ much across national borders.
• B) inflation is not affected by interest rates.
• C) inflation and interest rates do not follow the law of one price.
• D) varying interest rates take into account anticipated differences in inflation rates.

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Definitions:

Merger

The acquisition of one corporation by another.

Golden Parachute

A substantial benefit package given to corporate executives upon termination, often following a merger or takeover.

Dodd-Frank

Enacts financial regulatory reforms aimed at minimizing risk in the financial system following the 2008 crisis.

Executives

Senior-level managers in an organization responsible for strategic decision-making and overall business operations.