Assume That the Uncovered Interest Parity Condition Holds

question 58

Multiple Choice

Assume that the uncovered interest parity condition holds.Also assume that the U.S.interest rate is less than the U.K.interest rate.Given this information,we know that investors expect

• A)the pound to depreciate.
• B)the pound to appreciate.
• C)the dollar-pound exchange rate to remain fixed.
• D)the U.S. interest rate to fall.
• E) none of the above

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Definitions:

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Legally Enforceable

A term describing a contract or obligation that is recognized by law, meaning it can be upheld in court.

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An unwritten contract where the terms have been agreed upon verbally rather than in writing, yet can still be legally binding under certain conditions.