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Uncovered interest parity approximation

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Reference no: EM131773898

According to the the uncovered interest parody approximation "the home interest rate equals the foreign interest rate plus the expected rate of change in the value of the home currency vis a vis the foreign currency."

  • If the interest rate on US dollar accounts is 1 percent, and
  • the US dollar-Turkish lira (?) spot exchange rate is $0.25 = ?1, and
  • the US dollar-Turkish lira (?) expected exchange rate is $0.21

What is the Turkish lira interest rate, if the uncovered interest parity approximation (UIPA) holds?

Reference no: EM131773898

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