Assume That the Interest Rate in the Home Country of Currency

question 18

Multiple Choice

Assume that the interest rate in the home country of Currency X is a much higher interest rate than the U.S. interest rate. According to interest rate parity, the forward rate of Currency X:

• A) should exhibit a discount.
• B) should exhibit a premium.
• C) should be zero (i.e., it should equal its spot rate).
• D) B or C

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Definitions:

Waiver Statement

A legal document in which a person voluntarily relinquishes a known right, claim, or privilege.

Purchase-Money Security Interest

Purchase-money security interest is a legal claim or lien that allows a lender to repossess or claim goods purchased with borrowed funds if the borrower fails to meet the repayment terms.

Breached the Peace

This term refers to actions or behaviors that disturb public order or tranquility, often used in legal contexts regarding disturbances of peace.

Financing Statement

A document filed by a creditor to indicate a security interest in the personal property of a debtor, used in securing loans.