How high does the lending rate in the euro zone have to be before an arbitrageur would NOT consider borrowing dollars, trading for euro at the spot, investing in the euro zone and hedging with a short position in the forward contract? 
A) The bid-ask spreads are too wide for any profitable arbitrage when i€ > 0
B) 3.48%
C) -2.09%
D) None of the above
Correct Answer:
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Q1: A currency dealer has good credit and
Q2: Interest Rate Parity (IRP) is best defined
Q3: Suppose you observe a spot exchange rate
Q4: A U.S.-based currency dealer has good credit
Q5: An arbitrage is best defined as
A)a legal
Q7: Suppose you observe a spot exchange rate
Q8: Suppose that the one-year interest rate is
Q9: Suppose you observe a spot exchange rate
Q10: Covered Interest Arbitrage (CIA) activities will result
Q11: Suppose that the one-year interest rate is
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