Covered Interest Parity Refers to the Situation in Which

question 134

Multiple Choice

Covered interest parity refers to the situation in which:

• A) interest rates are the same in both currencies.
• B) spot and forward rates are the same in both currencies.
• C) the forward rate between the two currencies is equal to the ratio of their returns times the spot rate between the two currencies.
• D) there is an opportunity for arbitrage whenever prices are sluggish and sticky.

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Definitions:

Oxidation State

A numerical value that signifies the total electrons an atom gains or sheds to establish a chemical bond with a different atom.

Reduction

A chemical reaction in which a molecule gains electrons, often accompanied by a decrease in oxidation state.

Chemical Equation

A symbolic representation of a chemical reaction, with reactants on the left, products on the right, and an arrow indicating the direction of the reaction.

Iron

A strong, hard magnetic silvery-grey metal, very abundant in the earth's crust and the core element of hemoglobin in blood.