________ Asserts That Because a Forward Contract and a Cash-And-Carry

question 60

Multiple Choice

________ asserts that because a forward contract and a cash-and-carry strategy accomplish the same conversion, they must result in the same exchange rate.

• A) Covered interest parity
• B) Forward premium puzzle
• C) Forward discount puzzle
• D) None of the above

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Definitions:

Profit Motive

The primary incentive for businesses to operate and expand, driven by the pursuit of financial gain.

Pareto Efficient

A state of allocation of resources from which it is impossible to reallocate so as to make any one individual or preference criterion better off without making at least one individual or preference criterion worse off.

Net Benefit

The total positive impact of a decision or action, subtracting any costs or negative effects associated with it.

Trade

The exchange of goods, services, or both between parties, which can occur domestically or internationally.