Which One of the Following States That the Expected Percentage

question 3

Multiple Choice

Which one of the following states that the expected percentage change in the exchange rate between two countries is equal to the difference in the countries' interest rates?

• A)unbiased forward rates condition
• B)uncovered interest parity
• C)international Fisher effect
• D)purchasing power parity
• E)interest rate parity

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Definitions:

Factor Portfolio

A portfolio that is constructed to have a high sensitivity to certain economic or financial factors, aiming to capture specific risk premiums.

Well-diversified Portfolio

An investment portfolio comprised of various assets to reduce exposure to risk by spreading investments across different industries, asset classes, or other categories.

Beta

A measure of the volatility, or systematic risk, of a security or portfolio compared to the market as a whole.

Factor Portfolio

A portfolio constructed to have a high sensitivity to certain risk factors, aiming to achieve specific investment outcomes related to those factors.