Suppose That the One-Year Interest Rate Is 5

question 58

Multiple Choice

Suppose that the one-year interest rate is 5.0 percent in the United States and 3.5 percent in Germany,and that the spot exchange rate is $1.12/€ and the one-year forward exchange rate,is $1.16/€.Assume that an arbitrageur can borrow up to $1,000,000.

• A)This is an example where interest rate parity holds.
• B)This is an example of an arbitrage opportunity; interest rate parity does not hold.
• C)This is an example of a Purchasing Power Parity violation and an arbitrage opportunity.
• D)none of the options

Recognize strategies used by politicians to shape public opinion on moral and legal issues.

Understand the prevalence and impact of fake news in electoral politics.

Understand methods and challenges in public opinion polling, including effects like social desirability.

Distinguish between values and political ideologies and their expression in American politics.

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Definitions:

Monopolist

A market participant who has exclusive control over the supply of a particular good or service, allowing them to set prices without competition.

Market Efficiency

A condition in which all available information is fully reflected in prices and assets are priced appropriately.

Ideal Market

A theoretical marketplace where information is freely available to all participants, products are homogeneous, and there are no transaction costs, leading to perfect competition.

Monopolist

A solo producer or seller in a market who has significant control over the pricing and availability of a product or service, with no direct competition.