If the Interest Rate Is Lower in the U

question 88

Multiple Choice

If the interest rate is lower in the U.S. than in the United Kingdom, and if the forward rate of the British pound is the same as its spot rate:

• A) U.S. investors could possibly benefit from covered interest arbitrage.
• B) British investors could possibly benefit from covered interest arbitrage.
• C) neither U.S. nor British investors could benefit from covered interest arbitrage.
• D) A and B

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Definitions:

Milgram Experiment

A psychological experiment conducted by Stanley Milgram in the 1960s to study obedience to authority, where participants were instructed to administer electric shocks to another person.

Stanford University Prison Experiment

A psychological study conducted by Philip Zimbardo in 1971 at Stanford University, where students were assigned roles of prisoners and guards to explore the effects of perceived power.

Generalization

Drawing a conclusion about a certain characteristic of a population based on a sample from it.

Logical Support

The provision of reasons or evidence to justify a claim or argument.