According to the Interest Parity Condition,if the Domestic Interest Rate

question 81

Multiple Choice

According to the interest parity condition,if the domestic interest rate is ________ the foreign interest rate,then ________.

• A) above; there is expected appreciation of the foreign currency
• B) above; there is expected depreciation of the foreign currency
• C) below; there is expected appreciation of the foreign currency
• D) below; the interest parity condition is violated

---

Definitions:

Call

A contract that grants the holder the ability, though not the requirement, to purchase a certain quantity of an underlying asset at a predetermined price before a specified deadline.

Exercise Price

The set price at which an option's holder has the right to purchase (call) or sell (put) the underlying asset.

Stock Price

indicates the current price at which a share of a company can be bought or sold on a stock exchange.

Issue Value

The price at which a new issue of securities is offered for sale to the public or the nominal value of a security at the time of its issuance.