According to interest rate parity, if the interest rate in a foreign country is ____ than in the home country, the forward rate of the foreign country will have a ____.
A) higher; discount
B) lower; premium
C) higher; premium
D) A and B

Question

Quizplus · Accepted Answer

Interest rate parity suggests that if a foreign country's interest rate is higher than the home country's, its currency will trade at a forward discount. Conversely, if the foreign interest rate is lower, its currency will trade at a forward premium.

According to Interest Rate Parity, If the Interest Rate in a Foreign