If the gross domestic return is higher than the gross covered foreign return then:

Question

Quizplus · Accepted Answer

When the gross domestic return is higher than the gross covered foreign return, it implies that investors would prefer to invest domestically rather than in foreign markets when considering the forward cover. This scenario typically leads to a situation where the interest parity forward rate is higher than the actual forward rate, as the demand for domestic currency increases, appreciating its value in the forward market.

If the Gross Domestic Return Is Higher Than the Gross