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In the Presence of Bid-Offer Spreads, Inward Arbitrage Comes to an End

Question 26

Multiple Choice

In the presence of bid-offer spreads, inward arbitrage comes to an end when:

A) the difference between the domestic offer interest rate and the foreign bid interest rate is equal to the sum of the forward spread and the bid-offer spread
B) the difference between the domestic bid interest rate and the foreign bid interest rate is equal to the sum of the forward spread and the bid-offer spread
C) the difference between the domestic bid interest rate and the foreign offer interest rate is equal to the . sum of the forward spread and the bid-offer spread
D) the difference between the domestic offer interest rate and the foreign offer interest rate is equal to . the difference between the forward spread and the bid-offer spread

Correct Answer: