Simplify

question 351

Essay

Simplify:
+
+

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Definitions:

Covered Interest Arbitrage

A financial strategy to profit from the difference in interest rates between two countries while hedging against exchange rate risks.

Spot Rate

The current market price at which a particular asset, such as a currency, commodity, or security, can be bought or sold for immediate delivery.

Relative Purchasing Power Parity

Relative Purchasing Power Parity (RPPP) is an economic theory which postulates that the rate at which the exchange rate between two currencies will change over time is equivalent to the rate at which their purchasing power converges, essentially due to inflation rates differences.

Inflation

The rate at which the general level of prices for goods and services is rising, eroding purchasing power over time.