Interest Rate Parity Exists Because

question 36

Multiple Choice

Interest rate parity exists because

• A) there are investors who stand ready to engage in arbitrage.
• B) central banks ensure the relationship holds to protect currency values.
• C) inflation is the same in all industrialized countries.
• D) transactions costs and taxes make markets inefficient.

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Definitions:

Contingent Time Off

Time off from work that is not planned in advance and depends on certain conditions being met.

Quota

A limited or fixed number or amount of something, especially one officially allocated.

Specified Time Range

A defined period during which certain actions are taken or certain conditions apply, often set for achieving goals or completing projects.

Extrinsic Reward

A reward given to an individual that comes from an external source, typically in the form of tangible rewards or public recognition, to motivate behavior.