The term covered in covered interest arbitrage indicates


If interest rate parity is satisfied and the interest rate in the U. S. is greater than the interest rate in Japan we can conclude that:

a) the yen trades at a forward premium

b) the yen trades at a forward discount.

The term “covered” in covered interest arbitrage indicates that:

a) the default risk is insured.

b) there is no exchange rate risk exposure.

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Financial Management: The term covered in covered interest arbitrage indicates
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