Which of the Following Reasons Explain Why Interest Rate Parity

question 55

Multiple Choice

Which of the following reasons explain why interest rate parity may not hold perfectly?
I.Transaction costs
II.Business loan risks
III.Offshore risk accounting rules
IV.Political risk

• A) I only
• B) II and III
• C) I and IV
• D) I, III, and IV

---

Definitions:

Unemployment Rate

The ratio of the labor force characterized by lack of employment but ongoing job search efforts.

Great Depression

A severe worldwide economic downturn in the 1930s, marked by mass unemployment, deflation, and a significant decline in economic activity.

1970s

The 1970s is a decade known for significant economic, political, and cultural shifts, including the energy crisis, inflation, and changes in global politics.

Economic Worry

Concern or anxiety about the current or future state of the economy, often due to factors like inflation, unemployment, or recession.