The ________ relation indicates that the interest differential between investments in two currencies will equal the forward premium or discount between the currencies.
A)Fisher equation
B)interest rate parity
C)purchasing power parity
D)term structure of interest rates

Question

Quizplus · Accepted Answer

The given relation is referred to as the interest rate parity, which states that the interest rate differential between two currencies will be equal to the forward premium or discount between them. The Fisher equation relates nominal and real interest rates, while the purchasing power parity relates exchange rates to price levels, and the term structure of interest rates looks at the relationship between short-term and long-term interest rates.

The ________ Relation Indicates That the Interest Differential Between Investments