Please circle ALL of the correct statements below about arbitrage in foreign exchange markets. Assume...
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Accounting
Please circle ALL of the correct statements below about arbitrage in foreign exchange markets. Assume that free capital mobility exists between financial centers (such as New York, London, and Tokyo).
a. Locational arbitrage ensures that exchange rate quotes are aligned across financial centers.
b. Locational arbitrage ensures that interest rates in different currencies are equalized across financial centers.
c. Covered interest parity ensures that the forward premium equals the interest differential between two currencies.
d. Covered interest parity ensures that interest rates in different currencies are equalized across financial centers.
e. None of the above statements are true.
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