If Interest Rate Parity Holds, Then the One-Year Forward Rate

question 18

Multiple Choice

If interest rate parity holds, then the one-year forward rate of a currency will be ____ the predicted spot rate of the currency in one year according to the international Fisher effect.

• A) greater than
• B) less than
• C) equal to
• D) The answer is dependent on whether the forward rate has a discount or premium.

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