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Basic Question 13 of 27
Uncovered interest rate parity states that:
II. The expected interest differential should offset the inflation differential between the two countries.
III. The expected inflation differential should offset the currency differential between the two countries.
IV. The expected currency differential should offset the interest differential between the two countries.
I. The expected currency differential should offset the inflation differential between the two countries.
II. The expected interest differential should offset the inflation differential between the two countries.
III. The expected inflation differential should offset the currency differential between the two countries.
IV. The expected currency differential should offset the interest differential between the two countries.
User Contributed Comments 2
| User | Comment |
|---|---|
| danlan2 | I, III: PPP II: international fisher |
| jimmyvo | PPP = fx prices & inflation International fisher = interest & inflation Uncovered interest rate parity = fx price & interest |
Your review questions and global ranking system were so helpful.
Lina
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.