CFA Practice Question

There are 253 practice questions for this study session.

CFA Practice Question

Which of the following theory links forward exchange rates and expected spot exchange rates?

I. Purchasing power parity.
II. Covered interest rate parity.
III. The Fisher relation.
IV. Uncovered interest rate parity.
Correct Answer: II and IV

If both are true, we can conclude that expected exchange rate movements equal the forward discounts or premiums.

User Contributed Comments 1

User Comment
davidt876 haven't they been telling us this entire time that uncovered interest rate parity does not include forward rates - only spot rates and interest rates?
You need to log in first to add your comment.