What are three reasons that the interest-rate parity condition may not always hold?
What will be an ideal response?
First, there may be differences in default risk and liquidity. Second, there are transactions costs which may prevent returns from being exactly equal. Third, it does not take into account exchange-rate risk.
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In the United States, someone is classified as unemployed if he or she
A) does not have a job. B) does not have a job, or else has a job but is looking for a different one while continuing to work. C) does not have a job, has recently looked for work, and is collecting unemployment insurance. D) does not have a job, and is collecting unemployment insurance. E) none of the above
The market demand for wheat is Q = 100 - 2p + 1pb + 2Y. If the price of wheat, p, is $2, and the price of barley, pb, is $3, and income, Y, is $1000, the income elasticity of wheat
A) is 2 ? (1000/2099). B) is 2. C) is 1/2 ? (1000/2099). D) cannot be calculated from the information provided.