Interest Rate Parity Conditions Flashcards
1
Q
A
2
Q
_________ ensures that covered interest parity holds
A
3
Q
The expected return on an uncovered foreign currency investment should equal the return on a comparable domestic currency investment
A
Uncovered Interest Rate Parity
4
Q
What are the assumptions of a covered interest parity?
A
- Capital mobility
- Low transactions costs and taxes
- Equal risk
