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Foreign price of domestic currency

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Define the nominal exchange rate as the foreign price of domestic currency, e.g. the amount of Yen per dollar. When the interest parity condition holds, we know that the domestic interest rate must be equal to:

Group of answer choices

  • the expected rate of appreciation of the domestic currency.
  • the foreign interest rate minus the expected rate of appreciation of the foreign currency.
  • the expected rate of depreciation of the domestic currency.
  • the foreign interest rate.
  • the foreign interest rate minus the expected rate of appreciation of the domestic currency

Reference no: EM132519822

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