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UMB is considering in launching a new Absolute Currency Return Fund. In order to establish a currency hedging strategy, Caleb gathers the following information about foreign exchange rates, spot rate, forward rate, inflation and interest rates.
Exhibit
USDGBP
CHFUSD
Spot rate: USDGBP
day forward rate USDGBP
CADUSD spot rate
Expected US inflation
Expected Canadian inflation
US Interest rate
Canadian Interest rate
Factor : Currency appreciationdepreciation over time should just offset differences in interest rates.
The specific concept is related in factor is most accurately describes the:
A
International Fisher relation.
B
Interest rate parity relation.
C
Purchasing power parity relation
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