- CFA Exams
- CFA Level I Exam
- Study Session 4. Economics
- Reading 10. Currency Exchange Rates: Understanding Equilibrium Value
- Subject 3. A Long-Term Framework for Exchange Rates
CFA Practice Question
The nominal yield spread between domestic and foreign markets should equal the domestic/foreign expected inflation differential. This is:
A. Uncovered interest rate parity.
B. ex ante PPP.
C. International Fisher effect.
Explanation: If real interest rates are equal across markets, the Fisher effect can be extends to the International Fisher effect.
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