Which of the following might discourage covered interest arbitrage even if interest rate parity does not exist?
A) transaction costs.
B) political risk.
C) differential tax laws.
D) all of the above.

Question

Quizplus · Accepted Answer

Even if interest rate parity does not exist, covered interest arbitrage may still not be profitable due to various factors such as transaction costs, political risk, and differential tax laws. These additional costs and risks may offset any potential gains from the arbitrage, making it unattractive or unfeasible.

Which of the Following Might Discourage Covered Interest Arbitrage Even