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:

Restricting Writing

Generally refers to limiting or controlling the act of writing, either through physical means, censorship, or other forms of suppression.

Higher Probability Behavior

A concept in operant conditioning referring to a behavior that occurs more frequently, thus can be used as a reinforcement for a behavior of lower frequency.

FR-2 Schedule

A fixed-ratio schedule where reinforcement is provided after every second correct response.