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Basic Question 10 of 27
If you state that the forward exchange rate is an unbiased predictor of the spot exchange rate, you are basically implying:
B. Uncovered interest rate parity holds.
C. The international Fisher effect holds.
A. Covered interest rate parity holds.
B. Uncovered interest rate parity holds.
C. The international Fisher effect holds.
User Contributed Comments 2
| User | Comment |
|---|---|
| davidt876 | why not covered? i thought uncovered only considered the interest rate differential and the spot rate? while covered links in forward exchange rates.. |
| warnggg | Shouldn't this be Forward Rate Parity? |
Thanks again for your wonderful site ... it definitely made the difference.
Craig Baugh
Learning Outcome Statements
explain international parity relations (covered and uncovered interest rate parity, forward rate parity, purchasing power parity, and the international Fisher effect);
describe relations among the international parity conditions;
evaluate the use of the current spot rate, the forward rate, purchasing power parity, and uncovered interest parity to forecast future spot exchange rates;
explain approaches to assessing the long-run fair value of an exchange rate;
CFA® 2025 Level II Curriculum, Volume 1, Module 8.