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Running head: THE UNCOVERED AND COVERED INTEREST PARITY QUESTIONS
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The Uncovered And Covered Interest Parity Questions
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THE UNCOVERED AND COVERED INTEREST PARITY QUESTIONS

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Question Two: The Uncovered Interest Parity
2a). The uncovered interest rate parity abbreviated as UIP forms one of the major three financial
relations used internationally in the international finance fields as well as the macroeconomics
open economy. The UIP states that the nominal interest differential that exists in different
countries, in this case, the US and the UK need to be equal to the exchange rate expected
depreciation (Constantin and Nunes, 2017). It is known that the uncovered interest parity takes
the form of perfect capital mobility. Therefore, when an investor decides to borrow cash from the
US and then converts it to then decide to make an investment in the currency of UK, then the
investor will never be in a position to be bett...