Interest rate parity suggests that it is cheaper to borrow in a currency with a low nominal rate of interest.

Question

Quizplus · Accepted Answer

Interest rate parity suggests that the cost of borrowing in two different currencies should be equal when adjusted for exchange rates. Therefore, it is not necessarily cheaper to borrow in a currency with a low nominal rate of interest, as the exchange rate may offset any savings in interest rate.

Interest Rate Parity Suggests That It Is Cheaper to Borrow