GK
ACCOUNTING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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One-price rule
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Interest Rate Parity
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Exchange Power Parity
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Purchasing Power Parity
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Detailed explanation-1: -Interest rate parity (IRP) is a theory according to which the interest rate differential between two countries is equal to the differential between the forward exchange rate and the spot exchange rate.
Detailed explanation-2: -Interest rate parity is a theory that suggests a strong relationship between interest rates and a currency’s current exchange rate (called “spot” and its forward exchange rate.
Detailed explanation-3: -Interest rate parity (IRP)A condition in which the rates of return on comparable assets in two countries are equal. is a theory used to explain the value and movements of exchange rates. It is also known as the asset approach to exchange rate determination.
Detailed explanation-4: -A forward rate is the interest rate that will be paid on a loan or investment made in the future. A forward rate is an important tool for predicting future interest rates and for hedging against changes in those rates.