There are several reasons why interest rate parity may not hold exactly and, therefore, we can earn arbitrage profits from this situation
Indicate whether the statement is true or false
FALSE
Explanation: Transaction costs, differential taxation, government controls, political risk, and time lags between observing a profit opportunity and actually trading to realize the profit are the reasons that we can not earn arbitrage profits on a permanent basis.
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A theory of aggregate economic fluctuations called real business cycle theory holds that
A) changes in the real money supply are the only demand shocks that affect the natural rate of output. B) aggregate demand shocks do affect the natural rate of output. C) aggregate supply shocks do affect the natural rate of output. D) changes in net exports are the only demand shocks that affect the natural rate of output.
A scatterplot
A) shows how Y and X are related when their relationship is scattered all over the place. B) relates the covariance of X and Y to the correlation coefficient. C) is a plot of n observations on Xi and Yi, where each observation is represented by the point (Xi, Yi). D) shows n observations of Y over time.