A The differences reflect B. The differences expec C. The differences expes D. The differences unexp hat are the main reasons t DA Exchange rate risk DB Transaction costs. Dc Differences in defau OD. All of the above.
A The differences reflect B. The differences expec C. The differences expes D. The differences unexp hat are the main reasons t DA Exchange rate risk DB Transaction costs. Dc Differences in defau OD. All of the above.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:How does the interest-rate parity condition account for differences in interest rates in different countries on similar bonds?
OA. The differences reflect expected changes in the exchange rate.
OB. The differences expected changes in the bond's interest rate.
Oc. The differences expected changes in inflation.
OD. The differences unexpected changes in the bond's interest rate.
What are the main reasons that interest-rate parity may not hold exactly?
OA Exchange-rate risk.
OB Transaction costs.
Oc. Differences in default risk and liquidity.
OD. All of the above.
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