This Is the Amount of Additional Taxes a Firm Must

question 29

Multiple Choice

This is the amount of additional taxes a firm must pay out for every additional dollar of taxable income it earns.

• A)Average tax rate
• B)Marginal tax rate
• C)Progressive tax system
• D)Earnings before tax

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Definitions:

Forward Exchange Rate

The rate agreed upon for exchanging one currency for another at a future date.

Spot Exchange Rate

The immediate rate at which one can purchase or sell currency for on-the-spot delivery.

London Interbank Offer Rate

LIBOR; a benchmark interest rate at which major global banks lend to one another in the international interbank market for short-term loans.

Covered Interest Arbitrage

A trading strategy in which an investor uses a forward contract to hedge against exchange rate fluctuations, exploiting the interest rate differentials between two countries.