Relative PPP, IFR, covered/uncovered IRP

CFA Level II Economics
#1

Three part question.

  1. Covered and uncovered IRP are the same except one is through arbitrage and the other is through relative PPP + IFR. Is this thinking correct?

  2. For uncovered IRP, the country with relatively higher nominal interest rate will see its currency depreciate while the country with relatively lower nominal interest rate will see its currency appreciate. Is this correct?

  3. Are we able to use just Relative PPP to predict exchange rate movements? There’s a question from Kaplan that asks, “According to relative purchasing power parity, the expected JPY/EUR spot rate two years from now is closest to:” I thought only if when IFR and Relative PPP both hold (hence uncovered IRP holds), we are able to predict exchange rate movement?

#2
  1. For uncovered IRP, the country with relatively higher nominal interest rate will see its currency depreciate while the country with relatively lower nominal interest rate will see its currency appreciate. Is this correct?

Yes