In Equilibrium, If Both Uncovered and Covered Interest Parity Hold

question 160

Multiple Choice

In equilibrium, if both uncovered and covered interest parity hold, what condition should exist?

• A) World interest rates will be equal.
• B) Rates of inflation will equalize.
• C) The forward rate will equal the expected future spot rate.
• D) The forward rate will decrease as the spot rate rises.

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