Because the International Fisher Effect references the future spot rate of a currency,it is also called:
A)covered interest rate parity.
B)nominal interest rate parity.
C)uncovered interest rate parity.
D)real interest rate parity.

Question

Quizplus · Accepted Answer

The International Fisher Effect (IFE) is also known as uncovered interest rate parity, as it suggests that the difference in nominal interest rates between two countries should be equal to their expected change in exchange rates over a certain period. Covered interest rate parity (A) is a different concept that takes into account the cost of hedging against currency risk when investing internationally. Real interest rate parity (D) refers to the idea that the real interest rates in two countries should be equal for their currencies to be at equilibrium. Nominal interest rate parity (B) is not a commonly used term in international finance.

Because the International Fisher Effect References the Future Spot Rate