If interest rate parity holds between two countries then it must be true that:
A) The interest rates between the two countries are equal.
B) Significant covered interest arbitrage opportunities exist between the two currencies.
C) The interest rate differential between the two countries is equal to the percentage difference between the forward exchange rate and the spot exchange rate.
D) The current forward rate is an unbiased predictor of the future exchange rate.
E) The exchange rate adjusts to keep purchasing power constant across the two currencies.
Correct Answer:
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