Which method would apply in given case and why

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The forward-rate and spot-rate methods for discounting foreign-currency cash flows are equivalent if interest rate parity holds.

Assume that interest rate parity does not hold for a specific currency because it is pegged to the dollar at a fixed exchange rate and capital flows are controlled by the monetary authorities in the country in question. Which method would apply in that case and why?

Reference no: EM131276197

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