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Uncovered Interest Parity Is Defined as the Condition Which States

Question 204

Multiple Choice

Uncovered interest parity is defined as the condition which states that the:


A) Current forward rate is an unbiased predictor of the future spot exchange rate.
B) Exchange rate adjusts to maintain purchasing power parity among currencies.
C) Expected percentage change in the exchange rate is equal to the difference in the interest rates.
D) Exchange rates adjust such that the real rate of interest is constant across currencies.
E) Interest rate differential between two countries is equal to the percentage difference between the forward exchange rate and the spot exchange rate.

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