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Andre45 [30]
3 years ago
8

Assume that British interest rates are higher than U.S. rates, and that the spot rate equals the forward rate. Covered interest

arbitrage puts ____ pressure on the pounds spot rate and ____ pressure on the pound's forward rate.​
Social Studies
1 answer:
yKpoI14uk [10]3 years ago
3 0

Assume that British interest rates are higher than U.S. rates, and that the spot rate equals the forward rate. Covered interest arbitrage puts <u>upward</u> pressure on the pounds spot rate and <u>downward</u> pressure on the pound's forward rate.

<u>Explanation</u>:

<u>Interest rate</u> is the amount of interest charged by a person for lending his money. The interest rate for the amount borrowed or amount lent depends on the principal amount.

The <u>spot rate</u> also known as settlement price is the amount quoted for the immediate settlement of a property. It is determined based on the current market value of the property.

A <u>forward rate</u> is a forward-looking price which is quoted as the settlement price for the transaction that will not take place until specific date.

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