Interest Rate Parity (IRP) Implies That

question 41

Multiple Choice

Interest rate parity (IRP) implies that:

• A) international interest rates are irrelevant to exchange rate behaviour.
• B) market interest rates for similar risk instruments tend to equate across countries on an exchange- rate- adjusted basis.
• C) the annual depreciation of the home currency equals the foreign interest rate.
• D) the forward rate (F) plus the spot rate (S) equals the interest rate (R).

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Definitions:

Balance Sheet

A financial summary showing a company's assets, liabilities, and equity from shareholders at a designated time.

Prepared

The state of being ready for a specific event, action, or process, often involving prior planning or setup.

Unearned Fees

Income received by a company for services yet to be performed or goods to be delivered, recognized as a liability on the balance sheet until earned.

Current Liability

Obligations or debts that a company expects to settle within one fiscal year or the operating cycle, whichever is longer.