A Transaction That Exploits Differences in the Theoretical and Actual

question 1

Multiple Choice

A transaction that exploits differences in the theoretical and actual values of a foreign currency forward or futures contract is called

• A)covered interest arbitrage
• B)triangular arbitrage
• C)a conversion
• D)interest-rate parity
• E)none of the above

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Definitions:

Equity

The ownership interest held by shareholders in a corporation, represented by the residual assets of the company after deducting liabilities.

Shareholders' Funds

The total value of all a company's assets minus its liabilities, representing the equity ownership of shareholders.

Authorized

The formal approval or sanction for an action or the maximum amount of capital stock that a company can issue as authorized by its corporate charter.

Treasury

A department of government or a corporate department responsible for managing all financial operations, including issuing money, managing government or corporate debt, and executing monetary policy.