Which one of the following states that the expected percentage change in the exchange rate between two countries is equal to the difference in the countries' interest rates?

Question

Quizplus · Accepted Answer

Uncovered interest parity (UIP) states that the expected percentage change in the exchange rate between two countries is equal to the difference in the countries' interest rates. This theory assumes that capital flows freely between countries without any barriers, and that investors are perfectly rational and risk-neutral when making investment decisions. If UIP were to hold, then there would be no opportunity for investors to earn higher returns by investing in one country over another based on interest rates alone.

Which One of the Following States That the Expected Percentage