ef and e represent forward and spot exchange rates, and i and i* represent the interest rates
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Question:
ef and e represent forward and spot exchange rates, and i and i* represent the interest rates on domestic currency and interest rate on foreign currency, respectively.
Which of the following equations can represent the Covered Interest Parity? Check all that apply.
a. (1+i)ef = (1+i*)e
b. (1+i)/(1+i*) = e/ef
c. (ef -e)/e = (i*-i)/(1+i)b.
d. (1+i*)ef = (1+i)e
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