Covered interest arbitrage involves both Select one: A. the purchase of a foreign asset and a forward contract in the market for foreign exchange. B. the purchase of a domestic asset and a spot contract in the market for foreign exchange. C. the sale of a foreign asset and the purchase of a foreign contract in the market for foreign exchange. D. the sale of domestic stocks and the purchase of foreign bonds. E. none of the above.

A. the purchase of a foreign asset and a forward contract in the market for foreign exchange.

Explanation:

The covered interest arbitrage is the commonly form of arbitrage in which the investor used the forward contract against the risk of the exchange rate

In this, the norms are agreed and set by the investors to remove the future risk

Therefore as per the given situation, the first option is correct

hence, the same is to be considered

Thus, all the other options are wrong

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