The Situation in Which the Difference in Interest Rates Between

question 24

Multiple Choice

The situation in which the difference in interest rates between two currencies is equal to the expected change in the spot rate over the same period is known as:

• A) covered interest arbitrage.
• B) covered interest parity.
• C) uncovered interest parity.
• D) the forward-spot reversal.

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Definitions:

Unlimited Liability

The liability of the sole proprietor or the partners for all debts incurred by the business to the extent of their personal resources.

Sole Proprietorship

A business owned and operated by a single individual, where there is no legal distinction between the owner and the business entity.

Incorporated

A legal process whereby a business entity is formed as a distinct legal entity, separate from its owners, with its own rights and liabilities.

Principal

The main party to a transaction or contract who has a primary interest and authority in the context considered.