Ask Question
5 February, 02:46

Assume that interest rate parity does not hold, and Japanese investors are benefiting from covered interest arbitrage due to high interest rates in the U. S. Which of the following forces should result from this covered interest arbitrage activity? a. downward pressure on the yen's forward rate b. downward pressure on the yen's interest rate c. downward pressure on the yen's spot rate d. upward pressure on the U. S. interest rate

+2
Answers (1)
  1. 5 February, 05:03
    0
    c. downward pressure on the yen's spot rate

    Explanation:

    When a currency crisis takes place, it is because there is a strong drop in the value of a nation's currency. At the same time, this drop in value harms the economy since it gives place to unstableness in exchange rates, indicating that one unit of a determined currency is not useful to buy the same amount of another as in the past. This causes downward pressure on the spot rate of the most valuable currency.
Know the Answer?
Not Sure About the Answer?
Find an answer to your question ✅ “Assume that interest rate parity does not hold, and Japanese investors are benefiting from covered interest arbitrage due to high interest ...” in 📘 Social Studies if you're in doubt about the correctness of the answers or there's no answer, then try to use the smart search and find answers to the similar questions.
Search for Other Answers