If Interest Rate Parity Holds and the Forward Rate Is

question 11

True/False

If interest rate parity holds and the forward rate is expected to be an unbiased forecast of the future spot rate, then an uncovered investment in a foreign deposit will on average earn a similar effective yield as an investment in a domestic deposit.

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Definitions:

Amortization

The process of spreading out a loan into a series of fixed payments over time, which includes both principal and interest.

Patent

An exclusive right granted for an invention, which allows the patent owner to exclude others from making, using, or selling the invention.

Book Value

The difference between the total assets and total liabilities of a company, indicating its net asset value as recorded on the balance sheet.

Purchase

The acquisition of goods or services in exchange for money, signifying an increase in ownership of assets or services.