The concept that the difference in interest rates between two countries is equal to the percentage difference between the forward exchange rate and the spot exchange rate is called:

Question

Quizplus · Accepted Answer

The concept referred here is known as Interest Rate Parity. It states that the difference in interest rates between two countries is equal to the percentage difference between the forward exchange rate and the spot exchange rate. This concept governs the pricing of forward exchange rates and reflects the relationship between interest rates and the exchange rate. Therefore, the correct answer is E.

The Concept That the Difference in Interest Rates Between Two