Arbitrage in the foreign exchange market and international loans markets and goods markets achieves all of the following except
A)depreciation across all currencies.
B)interest rate parity.
C)no round- trip profit.
D)the law of one price.
E)purchasing power parity.

Question

Quizplus · Accepted Answer

Arbitrage activities aim to eliminate cross-market inefficiencies and ensure that prices, exchange rates, and interest rates are in equilibrium across different markets. Depreciation across all currencies is not a desirable outcome of arbitrage activities as it would lead to economic instability and uncertainty. The other options - interest rate parity, no round-trip profit, the law of one price, and purchasing power parity - are all desirable outcomes of arbitrage activities as they indicate that markets are operating efficiently and prices are in equilibrium.

Arbitrage in the Foreign Exchange Market and International Loans Markets