The Six-Month Interest Rate in the United States Is 10

question 34

Multiple Choice

The six-month interest rate in the United States is 10 percent; in Mexico it is 16 percent.The current spot rate dollars per peso is $0.20.The annualized six-month forward rate equal to ______ and peso is selling at a forward _______.

• A) 0.188, discount
• B) 0.212, premium
• C) 0.194, discount
• D) 0.206, premium

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Definitions:

Hans Selye

A pioneering Hungarian-Canadian endocrinologist known for his research on the stress response and for introducing the concept of "General Adaptation Syndrome".

Physiological Arousal

A state of physical alertness or excitement, which can be triggered by emotions, thoughts, or external stimuli, affecting bodily functions.

Fight-or-flight Response

A physiological reaction that occurs in response to a perceived harmful event, attack, or threat to survival.

Walter Cannon

A physiologist who coined the term "fight or flight" to describe the body's response to stress, and made significant contributions to understanding the autonomic nervous system.