In an Efficient Market Without Barriers to Capital Flows, the Cost-Savings

question 7

Multiple Choice

In an efficient market without barriers to capital flows, the cost-savings argument of the QSD is difficult to accept, because

• A)it implies that an arbitrage opportunity exists because of some mispricing of the default risk premiums on different types of debt instruments.
• B)it implies that an arbitrage opportunity exists because of some mispricing of the exchange rates on different maturities of forward contracts.
• C)none of the above

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Definitions:

Olfactory Receptor Cells

Specialized neurons in the nasal cavity responsible for detecting odors and sending information to the brain.

Thalamus

A major relay station in the brain that processes and directs sensory information to appropriate areas of the cortex.

Limbic System

The limbic system is a complex set of structures in the brain involved in emotion, behavior, and memory processing.

Chemical Sense

Refers to the sensory systems that allow organisms to perceive the chemical composition of their environment, primarily taste and smell.