Which of the following is not a correct statement of the interest rate parity (IRP) theory?
A) It states the relationship between inflation and interest rates.
B) It states that forward currency contracts can be used to eliminate foreign exchange risk.
C) It demonstrates how differences in interest rates across countries are offset by expected changes in exchange rates.
D) It describes the relationship between interest rates and currency levels by using forward currency exchange rates.
Correct Answer:
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