Which of the Following Is Not True Regarding Interest Rate

question 77

Multiple Choice

Which of the following is not true regarding interest rate parity (IRP) ?

• A) When interest rate parity holds, covered interest arbitrage is not possible.
• B) When the interest rate in the foreign country is higher than that in the home country, the forward rate of that country's currency should exhibit a discount.
• C) When the interest rate in the foreign country is lower than that in the home country, the forward rate of that country's currency should exhibit a premium.
• D) When covered interest arbitrage is not feasible, interest rate parity must hold.
• E) All of the above are true.

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