The Theory of ________ States That the Difference in the National

question 9

Multiple Choice

The theory of ________ states that the difference in the national interest rates for securities of similar risk and maturity should be equal to but opposite in sign to the forward rate discount or premium for the foreign currency, except for transaction costs.

• A) international Fisher Effect
• B) absolute PPP
• C) interest rate parity
• D) the law of one price

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