Register
Arbitragers applying Covered Interest Arbitrage drive the international currency and money markets toward the equilibrium described by: Select one: a. the nominal effective exchange rate index. b. the
206k views
1 vote
Arbitragers applying Covered Interest Arbitrage drive the international currency and money markets toward the equilibrium described by: Select one: a. the nominal effective exchange rate index. b. the interest rate parity. c. the purchasing power parity. d. the effective exchange rate index.

User Son Tran
by
4.9k points

1 Answer

1 vote

Answer:

The correct answer is letter "B": the interest rate parity.

Step-by-step explanation:

The economic theory of Interest Rate Parity (IRP) states that the difference between interest rates in the two countries is equal to the difference between the forward rate and the spot rate in both countries. This equality does not always exist and allows traders to arbitrate positions to earn riskless returns. This approach is mostly used by Forex traders.

User Sivaraj
by
4.6k points
Ask a Question
Welcome to QAmmunity.org, where you can ask questions and receive answers from other members of our community.

5.2m questions

6.8m answers

Other Questions

Decker Tires' free cash flow was just FCF0 = $1.32. Analysts expect the company's free cash flow to grow by 30% this year, by 10% in Year 2, and at a constant rate of 5% in Year 3 and thereafter. The WACC
Misk Co. purchased the following securities during 20X7 to be classified as held-to-maturity securities, trading securities, or available-for-sale securities: I. Debt securities bought and held for the
Risa has to work long hours and sometimes weekends, losing out on family time. Risa doesn't find her long hours overly stressful, but rather she sees it as her contribution to maintaining her family's
Explain the similarities and differences between how both producers and consumer use money
Donna's philosophy as she coordinates the marketing efforts is to keep in mind the company's overarching strategy, and to ensure that all marketing activities send a consistent message, beginning with
Link Copied!