When the Forward Premium or Discount on the Foreign Currency

question 14

Multiple Choice

When the forward premium or discount on the foreign currency equals the interest differential between the domestic and foreign interest rates divided by one plus the foreign interest rate,what is being satisfied?

• A) covered interest arbitrage
• B) interest rate parity
• C) domestic and foreign interest rates
• D) spot and forward exchange rates

---

Definitions:

Coinsurance Clause

A provision in an insurance policy that defines the split of costs between the insurer and the insured after the deductible is met.

Coinsurance Clause

A provision in insurance policies that requires the policyholder to bear a portion of the costs of a claim, serving to share risk between the insurer and insured.

Life Policy

A contract with an insurance company that pays a designated beneficiary a sum of money upon the death of the insured person.

Premiums Payable

Liabilities on an insurance company's balance sheet, representing amounts due to policyholders.