Suppose That the One-Year U

question 22

Multiple Choice

Suppose that the one-year U.S.interest rate is 4% and the equivalent one-year U.K.interest rate is 6%.According to the covered interest rate parity,there is a ________ on the British pound.

• A) 2% forward discount
• B) 2% forward premium
• C) 10% forward discount
• D) 10% forward premium

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Definitions:

Explicit Preferences

Preferences or choices that are clearly expressed or openly displayed by an individual, often reflecting conscious decisions and beliefs.

Implicit Preferences

Unconscious biases or inclinations towards certain ideas, individuals, or objects.

Implicit Attitude

An attitude that exists outside of conscious awareness, influencing feelings and behavior unconsciously.

Explicit Attitude

Attitudes that people consciously endorse and can easily report, reflecting deliberate beliefs and feelings.