The equilibrium Eurodeposit rate is kept within a range (between the cost of raising funds in the domestic market and the domestic deposit rate) by:

Question

Quizplus · Accepted Answer

Arbitrage ensures that the equilibrium Eurodeposit rate is kept within a specific range by taking advantage of the price differences between markets. If the Eurodeposit rate goes too high or too low compared to domestic rates, arbitrageurs will move funds to capitalize on the discrepancy, thus bringing the rates back into alignment.

The Equilibrium Eurodeposit Rate Is Kept Within a Range (Between