When using ____, funds are typically tied up for a significant period of time.
A) covered interest arbitrage
B) locational arbitrage
C) triangular arbitrage
D) B and C

Question

Quizplus · Accepted Answer

Covered interest arbitrage involves borrowing in a low-interest-rate currency, converting to a high-interest-rate currency, and investing in a high-interest-rate financial instrument with the hope of profiting from the interest rate differential. However, to execute this strategy, funds must be tied up for a significant period of time, as the investor must hold the high-interest-rate instrument until maturity to earn the interest.

When Using ____, Funds Are Typically Tied Up for a Significant