There Can Be an Opportunity for Covered Interest Arbitrage If

question 44

Multiple Choice

There can be an opportunity for covered interest arbitrage if:

• A) the interest rate is low and the exchange rate is high.
• B) the forward/spot rate difference is either larger or smaller in percentage terms than the difference in the interest rates on two currencies.
• C) there is a time lag on the settlement of the transactions.
• D) the interest rate is high and the exchange rate is low.

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Definitions:

Rates of Growth

The rate at which a variable such as output, income, or population expands over a specific period of time, usually expressed as a percentage.

Unemployment

The situation in which individuals who are willing and able to work are unable to find employment.

Money Supply

The aggregate economic assets in monetary form at a specific period in an economy.

Demand for Goods and Services

The consumers' desire and willingness to pay for products or services at a given price point.