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Question
Covered interest rate arbitrage is possible when:a. both currencies are appreciating.
b. the actual inflation rates are identical in both countries.
c. the difference in the interest rates in two countries exactly equals the spot-to-forward exchange rate differential.
d. the difference in interest rates in two countries is out of line with the spot-to-forward exchange rate differential.
e. none of the above
Answer
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Related questions
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Covered interest rate arbitrage is possible when:
a. both currencies are appreciating.
b. the actual inflation rates are identical in both countries.
c. the difference in the interest rates in two countries exactly equals the spot-to-forward exchange rate differential.
d. the difference in interest rates in two countries is out of line with the spot-to-forward exchange rate differential.
e. none of the above
Q:
A London based firm has a subsidiary located in New York. The subsidiary has $1,000 in assets, $750 in liabilities and $250 in equity. The current spot rate is $1.60/£.If the spot rate changes to $1.50/£, what will be the firm's gain or loss?a. $10.42 gainb. £10.42 gainc. $10.42 lossd. £10.42 losse. cannot be determined