Interest parity holds when:
A) interest rates are the same in all countries.
B) interest rates differ between countries by the differences in national inflation rates.
C) interest rates differ between countries by the expected rates of change in exchange rates.
D) interest rates and exchange rates are unrelated.

Question

Quizplus · Accepted Answer

Interest parity holds when interest rates between countries differ by the expected rates of change in exchange rates, aligning the return on investments across countries when considering currency exchange rate movements.

Interest Parity Holds When