One Theory That Is Useful States That the Forward Premium

question 44

Multiple Choice

One theory that is useful states that the forward premium or discount should be equal and opposite in sign to the difference in the national interest rates for securities of the same maturity.This theory is known as

• A) the forward rate theory.
• B) the interest rate parity theory.
• C) the exchange rate theory.
• D) the covered interest arbitrage theory.

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Definitions:

Persuasive Authority

References or citations that a court may consider in making its decision but is not obliged to follow because they come from a different jurisdiction or are secondary sources.

Sixth Circuit

A federal judicial circuit in the United States that encompasses parts of the Midwest, including Kentucky, Michigan, Ohio, and Tennessee.

Eighth Circuit

Refers to the United States Court of Appeals for the Eighth Circuit, a federal court with appellate jurisdiction over the district courts in certain Midwestern and Southern states.

Case on All Fours

Describes a case with factual and legal circumstances so similar to a case at hand that its precedent is considered highly persuasive.