IRP

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How to calculate Interest Rate Parity?
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As per IRP, country with higher interest rate will have currency depreciation against the country in which int rates are low. Based on present home currency spot rate against, say $, the forward discount for future period is calculated. i.e you have to discount the rupee by taking prevailing interest rates assuming to be constant. The formula, forward rate = present rate (say 65) * [ 1 + rupee int rate / 1+ $ int rate ] can be used


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