If interest rate parity holds,the currency of the country with the relatively _______ interest rates will trade at a forward _______ to the country with the relatively _______ interest rate.
A) high; premium; low
B) low; discount; high
C) high; discount; low
D) None of the given choices

Question

Quizplus · Accepted Answer

Interest rate parity suggests that the currency of the country with higher interest rates will depreciate in the future, hence it will trade at a forward discount relative to the currency of the country with lower interest rates.

If Interest Rate Parity Holds,the Currency of the Country with the Relatively