Economics · Foreign Exchange Market
In the Foreign Exchange Market, a forward exchange rate is determined by adjusting the spot rate based on the interest rate differential between the two currencies. This principle is known as:
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1Fisher Effect
- 2Law of One Price (LOP)
- 3Interest Rate Parity (IRP)✓
- 4Purchasing Power Parity (PPP)
Correct answer
Interest Rate Parity (IRP)
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