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Interest Rate Parity
A theory stating that the difference between the interest rates of two countries is equal to the differential between the forward exchange rate and the spot exchange rate of their currencies.
Forward Exchange Rate
An agreed exchange rate for a currency transaction that will occur at a future date.
Spot Exchange Rate
The current price for exchanging one currency for another, available for immediate delivery.
Interest Rate Parity
An economic theory that suggests the difference in interest rates between two countries will be equal to the difference in exchange rates between their currencies.
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