If a Currency Futures Contract (Direct Quote)is Priced Below the Price

question 69

Multiple Choice

If a currency futures contract (direct quote) is priced below the price implied by Interest Rate Parity (IRP) ,arbitrageurs could take advantage of the mispricing by simultaneously

• A)going short in the futures contract,borrowing in the domestic currency,and going long in the foreign currency in the spot market.
• B)going short in the futures contract,lending in the domestic currency,and going long in the foreign currency in the spot market.
• C)going long in the futures contract,borrowing in the domestic currency,and going short in the foreign currency in the spot market.
• D)going long in the futures contract,borrowing in the foreign currency,and going long in the domestic currency,investing the proceeds at the local rate of interest.

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Definitions:

Heroic Measures

Extreme medical procedures taken to preserve life in situations where recovery is unlikely.

Nonmaleficence

Nonmaleficence is an ethical principle in medicine that means to do no harm or inflict the least harm possible to reach a beneficial outcome.

Unconscious Patient

A person who is not awake and not aware of the environment due to various medical or psychological reasons.

Life Support

Medical equipment that maintains vital bodily functions during severe illness or injury, such as ventilators for breathing support.