Question

can i use expected return rate instead of interest rate when calculating uncovered interest parity

Answer 1

The uncovered Interest Rate Parity is a financial theory that postulates that the difference in the nominal interest rates between two countries is equal to the relative changes in the foreign exchange rate.

The key difference between an interest rate and a expected return is that the expected return is the overall net amount that a lender recieve from a borrower thus it comprises both the interest rate and the capital gain.However interest rate do not comprise capital gains.

Thus you cannot use the expected return rate instead of interest rate when calculating uncovered interest parity.