Spot exchange rates is equal to interest rate differential

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Reference no: EM13814675

True/False

1. Interest rate parity states that the percentage difference between the forward and the spot exchange rates is equal to the interest rate differential.

2. According to the Purchasing Power Parity, forward exchange rate adjusts perfectly to inflation differentials between two countries.

3. Interest rate differential is a good forecaster of the exchange rate in the short run.

4. A currency quote with a forward premium should depreciate because the forward premium is equal to the interest rate differential.

5. In an efficient market, the typical investor could consider as asset price to reflect its true fundamental value at all times.

Reference no: EM13814675

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