In Efficient Markets, Interest Rate Parity Should Assure That the Costs

question 5

True/False

In efficient markets, interest rate parity should assure that the costs of a forward hedge and money market hedge should be approximately the same.

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Definitions:

Market Rate of Interest

The prevailing rate at which interest is paid by borrowers for loans or earned by investors for deposit accounts, typically influenced by the supply and demand for money in the economy.

Semiannually

Occurring or calculated twice a year, typically used in the context of bond interest payments or other financial assessments.

Market Rate of Interest

The prevailing rate of interest available in the market for investments of comparable risk and term.

Bond Indenture

A legal contract outlining the terms and conditions between the bond issuer and the bondholders.