If Interest Rate Parity (IRP) Exists, Then the Rate of Return

question 57

True/False

If interest rate parity (IRP) exists, then the rate of return achieved from covered interest arbitrage should be equal to the rate available in the foreign country.

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Definitions:

Price Ceiling

A price ceiling is a government-imposed limit on the maximum price that can be charged for a product or service, intended to protect consumers from excessive prices.

Consumer Durables

Goods that are not for immediate consumption and can be used repeatedly over a period of time, such as appliances, cars, and furniture.

Autonomous Consumption

Spending by consumers that is not influenced by changes in current income levels, typically covering basic necessities.

Disposable Income

The pool of funds households have for saving and spending pursuits after income taxes are factored out.