ACI 3I0-012 Question Answer
The Interest Rate Parity Theorem states that:
Interest rates in different currencies will tend to move into line with each other over time
Interest rates in different currencies differ due to differences in expectations about inflation
Selling a low interest rate currency to invest a high interest rate currency will only be profitable if one hedges the currency risk
Selling a low interest rate currency to invest in a high interest rate currency should not be profitable if one hedges the currency risk
TESTED 15 Jul 2025
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