Which of the following is a feature of the 'Uncovered Interest Parity' condition?
A. The interest differential equals the forward premium
B. Only covered arbitrage matters
C. Interest rates are always equal
D. The interest differential equals the expected change in the exchange rate
Answer: Option D
Solution (By JKSSB Mock Tests)
Uncovered interest parity states that the interest rate differential between two currencies equals the expected rate of depreciation of the high-interest currency.
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