Question 14 3 pts Which of the following statements is True The interest rate on pounds in the United Kingdom is 8 percent. The interest rate in the United States is 5 percent. Interest rate parity exists. U.S. investors will earn a lower return domestically than British investors earn domestically The word "covered in "covered interest arbitrage refers to the investors hedging their position to protect against the possibility of default risk. Assume that the real interest rate in the United States and in the United Kingdom is 3 percent. The expected annual inflation in the United States is 3 percent, while in the United Kingdom it is 4 percent. The forward rate on the pound should exhibit a premium of about 1 percent. Interest rate parity suggests that an exchange rate should change over time based on the difference in Interest rates between foreign versus domestic risk-free interest-bearing securities as of today Locational arbitrage is focused on capitalizing on the difference in nominal interest rates in two different locations