Which of the Following Variables Used in the Covered Interest

question 57

Multiple Choice

Which of the following variables used in the covered interest arbitrage formula are correctly defined?
I.R_FC:
Foreign country nominal risk-free interest rate
II.R_US:
U.S.real risk-free interest rate
III.F₁:
360-day forward rate
IV.S₀:
Current spot rate expressed in units of foreign currency per one U.S.dollar

• A)I and II only
• B)III and IV only
• C)I, III, and IV only
• D)II, III, and IV only
• E)I, II, III, and IV

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Definitions:

Altruism

The principle or practice of concern for the welfare of others, often at a cost to oneself.

Competitiveness

A personal trait characterized by a desire to win or be more successful than others, often driving individuals to pursue goals with vigor and persistence.

Hostility

Hostility is an emotion characterized by antagonism or aggression towards others, often resulting from frustration or perceived threats.

Type A

A personality characterized by a constant sense of urgency, competitiveness, and an excessive preoccupation with work and time management.