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:

United States

A country located primarily in North America, comprising 50 states, a federal district, five major self-governing territories, and various possessions.

Literacy And Schooling

The relationship between the ability to read and write, and formal education processes.

Cognitive Processing

Cognitive processing refers to the series of mental activities involved in acquiring, organizing, and understanding information, including perception, memory, and decision-making.

Cognitive Ability

The capacity of an individual to perform various mental activities related to learning, problem-solving, decision-making, and adapting to new situations.