The condition that relates interest rate differentials between countries to the percentage difference between their forward and spot exchange rates is called:

Question

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Interest rate parity is the condition that describes the relationship between the interest rate differentials of two countries and the percentage difference between the forward and spot exchange rates of their currencies. It holds that the difference in interest rates between two countries is equal to the difference between the forward and spot exchange rates, adjusted for the forward premium or discount. This principle helps in understanding how interest rates and exchange rates are interconnected in the global financial markets.

The Condition That Relates Interest Rate Differentials Between Countries to the Percentage