If Interest Rate Parity Exists, Then the Rate of Return

question 6

True/False

If interest rate parity exists, then the rate of return achieved from covered interest arbitrage should be equal to the interest rate available in the foreign country.

---

Definitions:

Profitable

A financial status indicating that the revenue of an entity is greater than its expenditures over a specified period, resulting in a net gain.

Working Capital

The difference between a company's current assets and current liabilities, indicating the short-term financial health and operational efficiency of a company.

Short-term Liabilities

Financial obligations of a business that are due to be settled within one year, such as accounts payable, short-term debts, and accrued expenses.

Automatic Financing

A preapproved loan where funds are automatically available when needed.