Which one of the following conditions states that the expected percentage change in the exchange rate is equal to the difference in interest rates?

A) Uncovered interest parity.
B) Unbiased forward rates.
C) Interest rate parity.
D) Purchasing power parity.
E) International Fisher effect.

Uncovered interest parity (UIP) states that the expected change in the exchange rate between two currencies is equal to the difference in their interest rates. This concept suggests that investors should expect to earn the same return on similar risk investments in different currencies, once the change in exchange rates is considered.