Assume That the U

question 78

Multiple Choice

Assume that the U.S. interest rate is 10%, while the British interest rate is 15%. If interest rate parity exists, then:

• A) British investors who invest in the United Kingdom will achieve the same return as U.S. investors who invest in the U.S.
• B) U.S. investors will earn a higher rate of return when using covered interest arbitrage than what they would earn in the U.S.
• C) U.S. investors will earn 15% whether they use covered interest arbitrage or invest in the U.S.
• D) U.S. investors will earn 10% whether they use covered interest arbitrage or invest in the U.S.

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Definitions:

Bipolar II Disorder

Form of bipolar disorder in which only hypomanic episodes are experienced and the depressive component is more pronounced.

Hypomania

State in which an individual shows mild symptoms of mania.

Hypermania

A severe form of mania characterized by excessive energy, euphoria, grandiosity, and a decreased need for sleep.

Psychomotor Retardation

A slowing-down of thought and a reduction of physical movements in an individual, often observed in major depressive disorder.