Which of the Following Might Discourage Covered Interest Arbitrage Even

question 2

Multiple Choice

Which of the following might discourage covered interest arbitrage even if interest rate parity does not exist?

• A) transaction costs.
• B) political risk.
• C) differential tax laws.
• D) all of the above.

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Definitions:

EBIT

Earnings Before Interest and Taxes, a measure of a company's profitability calculated by excluding interest and income tax expenses.

Breakeven Diagrams

Graphical representations that show the point at which total costs and total revenue are equal, indicating no net loss or gain.

Unit Sales

The total number of individual items or products sold within a specific period.

Business Risk

The potential that a company will have lower than anticipated profits or experience a loss rather than making a profit.