Economics · International Finance
Which of the following exchange rate theories suggests that the difference between spot and forward exchange rates is determined by the interest rate differential between two currencies?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1Purchasing Power Parity theory
- 2Interest Rate Parity theory✓
- 3International Fisher Effect
- 4Expectations theory
Correct answer
Interest Rate Parity theory
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