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Consider Covered Investments Between the United States and Japan

Question 33

Multiple Choice

Consider covered investments between the United States and Japan. If Japanese interest rates decrease, interest arbitrage operations will most likely result in a(n) :


A) increase in the spot exchange price of the yen.
B) increase in the forward exchange price of the dollar.
C) sale of dollars in the forward market.
D) purchase of yen in the spot market.

Correct Answer:

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