Hello,
There was a question in the CFAI text that says to determine the best indicator of future spot exhange rate based upon the following statement:
“I believe in the current environment, both uncovered and covered interest rate parity are in effect”
A. Current spot rate
B. Forward exchange rates
C. Inflation rate differentials
The answer to this is B, but it seems like both B and C would be current, given the question says that BOTH covered and uncovered interest rate parity are in effect.
Why would the answer only be B instead of C as well?