Question: Which best explains why covered interest rate parity is empirically stronger than uncovered interest rate parity? Futures contracts impose additional transactions costs Covered interest rate

Which best explains why covered interest rate parity is empirically stronger than uncovered interest rate parity?

Futures contracts impose additional transactions costs

Covered interest rate parity is enforced by arbitrage, whereas taking advantage of uncovered interest rate parity violations is risky

Covered interest rate parity relies on futures which are generally unbiased predictors of the spot rate

Covered interest rate parity violations generate profits today whereas profits from violations of uncovered interest rate parity accrue in the future

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