The interest parity condition indicates that the interest differential is equal to the
A)risk premium.
B)forward premium.
C)futures premium.
D)arbitrage premium.

Question

Quizplus · Accepted Answer

The interest parity condition states that the difference between the interest rates of two different countries is equal to the forward premium or discount on the exchange rate between those countries. Therefore, choice B - forward premium - is the best answer. The other options (A, C, and D) are not accurate representations of the interest parity condition.

The Interest Parity Condition Indicates That the Interest Differential Is