Question
Which of the following is NOT a correct statement? If quoted exchange rates are the same across different locations, then locational arbitrage is not feasible.
Which of the following is NOT a correct statement?
If quoted exchange rates are the same across different locations, then locational arbitrage is not feasible.
When the interest rate parity (IRP) holds, covered interest arbitrage is not feasible.
According to the interest rate parity (IRP), the forward rate differs from the spot rate by a sufficient amount to offset the inflation differential between two currencies.
Points below the IRP line represent situations where covered interest arbitrage is feasible from the perspective of domestic investors and results in a yield above what is possible domestically.
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