Respuesta :
Assume that the interest rate on borrowing in japing is 1 percent while the interest rate on deposits in Australian is 5 percent True.
How is parity interest calculated?
The forward exchange rate should be the spot exchange rate times the domestic interest rate, divided by the foreign interest rate, and then added to the spot exchange rate.
Interest rate parity theory: what is it?
According to the interest rate parity (IRP) theory, the difference between the interest rates of two nations is equal to the difference between the rates of their respective currencies' forward and spot exchanges.
The difference in interest rates is what?
A comparison of two similar interest-bearing assets' interest rates is called an interest rate differential (IRD). Most frequently, it is the variation in interest rates. IRDs are used by traders on the foreign currency market to price ahead exchange rates.
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