Question

# The relationship that links spot exchange rates, interest rates, and forward exchange rates is described as...

The relationship that links spot exchange rates, interest rates, and forward exchange rates is described as the ____________?

A.Interest rate parity theorem

B.Law of one price

D.Foreign exchange

Answer - A. Interest rate parity theorem

Interest rate parity is a theorem that describes interest rate differential between two countries is equal to the differential between the forward exchange rate and the spot exchange rate.

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