Which of the following statements is true?
A)The implications of the interest rate parity theorem is that in a competitive market for deposits, loans and foreign exchange, the potential profit opportunities from overseas investment for the FI manager are likely to be large.
B)The implications of the interest rate parity theorem is that in a competitive market for deposits, loans and foreign exchange, the potential profit opportunities from overseas investment for the FI manager are likely to be non-existent.
C)The implications of the interest rate parity theorem is that in a competitive market for deposits, loans and foreign exchange, the potential profit opportunities from overseas investment for the FI manager are likely to be small.
D)None of the listed options are correct.

Question

Quizplus · Accepted Answer

The interest rate parity theorem states that in a competitive market for deposits, loans and foreign exchange, the potential profit opportunities from overseas investment for the FI manager are likely to be small, as the interest rate differential is expected to be equal to the expected exchange rate differential. Therefore, option C is the correct statement. Options A and B are the opposite extremes and are not true. Option D is incorrect as at least one option is true.

Which of the Following Statements Is True