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Covered Interest Arbitrage Moves the Market ________ Equilibrium Because ________

Question 52

Multiple Choice
Covered interest arbitrage moves the market ________ equilibrium because ________.

Covered interest arbitrage moves the market ________ equilibrium because ________.


A) toward; purchasing a currency on the spot market and selling in the forward market narrows the differential between the two
B) toward; investors are now more willing to invest in risky securities
C) away from; purchasing a currency on the spot market and selling in the forward market increases the differential between the two
D) away from; demand for the stronger currency forces up interest rates on the weaker security

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