- CFA Exams
- CFA Level I Exam
- Topic 2. Economics
- Learning Module 8. Currency Exchange Rates: Understanding Equilibrium Value
- Subject 3. A Long-Term Framework for Exchange Rates
CFA Practice Question
True or False?
II. If the covered interest differential between two money markets is nonzero, there is an arbitrage incentive to move money from one market to the other.
I. Covered interest differentials tend to disappear through covered interest arbitrage.
II. If the covered interest differential between two money markets is nonzero, there is an arbitrage incentive to move money from one market to the other.
Correct Answer: Both I and II are true.
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