CFA Practice Question

There are 253 practice questions for this study session.

CFA Practice Question

______ is the difference between the domestic interest rate and the hedged or "covered" foreign rate.

A. Bid-ask spread.
B. Covered interest differential.
C. Interest rate parity.
Correct Answer: B

When interest rate parity ensures that the return on a hedged foreign investment will equal the domestic interest rate on investments of identical risk, the covered interest differential equals zero.

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