Which one of the following occurs when interest rate parity exists between countries A and B?
A) Country A investors are indifferent between risk-free investments in countries A and B
B) Forward exchange rates for countries A and B must be equal for all time periods
C) Risk-free interest rates in countries A and B must be equal
D) Spot and forward exchange rates between the currencies of the two countries must be equal
E) Significant covered interest arbitrage opportunities between currencies A and B must exist
Correct Answer:
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