Which one of the following 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?

Question

Quizplus · Accepted Answer

The statement refers to interest rate parity, which 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 is fundamental in understanding and predicting exchange rate movements, as it reflects the equilibrium condition in which interest rate differentials between two countries are equal to the expected exchange rate movement between them.

Which One of the Following States That the Difference in Interest