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Basic Question 25 of 27
Which parity states that interest rate differentials are a good predictor of future exchange rate changes?
B. Uncovered interest rate parity.
C. the international Fisher effect.
A. Covered interest rate parity.
B. Uncovered interest rate parity.
C. the international Fisher effect.
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I am happy to say that I passed! Your study notes certainly helped prepare me for what was the most difficult exam I had ever taken.
Andrea Schildbach
Learning Outcome Statements
explain international parity relations (covered and uncovered interest rate parity, forward rate parity, purchasing power parity, and the international Fisher effect);
describe relations among the international parity conditions;
evaluate the use of the current spot rate, the forward rate, purchasing power parity, and uncovered interest parity to forecast future spot exchange rates;
explain approaches to assessing the long-run fair value of an exchange rate;
CFA® 2025 Level II Curriculum, Volume 1, Module 8.