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:

Market Segment

A subsection of a market comprised of individuals or organizations with similar characteristics, needs, or behaviors, often targeted with specific marketing strategies.

Uncertainty

The lack of clarity about future events that can cause entrepreneurs to take unreasonable actions.

Pivot

A change in business direction.

Ethical Boundary

The limits of acceptable behavior and practices, determined by ethical principles and standards, beyond which actions become morally wrong.