Asked by
Simon Velasquez
on Nov 07, 2024
Verified
The interest rate parity approximation formula is:
A) Ft = S0 [1 + (RFC + RCDN) ]t.
B) Ft = S0 [1 - (RFC - RCDN) ]t.
C) Ft = S0 [1 + (RFC - RCDN) ]t.
D) Ft = S0 [1 + (RFC RCDN) ]t.
E) Ft = S0 [1 - (RFC + RCDN) ]t.
Interest Rate Parity
A theory which suggests that the difference in interest rates between two countries is equal to the expected change in exchange rates between their currencies.
Approximation Formula
A mathematical equation or expression used to estimate a value or to simplify calculations.
- Understand the principles and consequences of interest rate parity.
Verified Answer
OG
Learning Objectives
- Understand the principles and consequences of interest rate parity.