If the Interest Rate Is Lower in the U

question 94

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:

Incremental Moves

Small, gradual changes or advancements towards a goal, rather than large, dramatic leaps.

Organizational Flexibility

The ability of an organization to adapt to changes, restructure operations, and innovate to meet new challenges.

Complexity

Refers to the state of having multiple interconnected parts, which may make a system or process difficult to understand, predict, or manage.

Environmental Opportunities

Circumstances or factors in the external environment that a business or individual can exploit for benefit.