Assuming Covered Interest Parity Holds, A(n) ________ in the Domestic

question 63

Multiple Choice

Assuming Covered Interest Parity holds, a(n) ________ in the domestic interest rate will ________ the forward rate, all other things held constant.

• A) increase, increase
• B) increase, decrease
• C) decrease, decrease
• D) decrease, have no effect on

---

Definitions:

Par Value

A nominal or face value assigned to a share of stock by the company's charter, not necessarily reflecting its market value.

Yielding

The act of producing or generating an income or return from an investment over a specified period of time.

Constant Growth Model

A method to estimate the value of a stock by assuming a constant rate of dividend growth.

Required Return

The expected return that investors demand for investing in a security or a portfolio.