Assume the U

question 22

Multiple Choice

Assume the U.S. interest rate is 2% higher than the Swiss rate, and the forward rate of the Swiss franc has a 4% premium. Given this information:

• A) Swiss investors who attempt covered interest arbitrage earn the same rate of return as if they invested in Switzerland.
• B) U.S. investors who attempt covered interest arbitrage earn a higher rate of return than if they invested in the U.S.
• C) A and B
• D) none of the above

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Definitions:

Yardstick Approach

A method of decision-making that involves comparing alternative actions against a predefined standard or "yardstick."

Recycling Program

An organized effort to collect, process, and repurpose waste materials to reduce environmental impact.

Direct Approach

A communication strategy that involves presenting the main point or request at the beginning of the message.

Recommendations

Suggestions or advice given based on analysis or experience, aimed at guiding decisions or actions.