Answer :
Word Count : 323
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Interest rate parity (IRP) is a fundamental concept in international business finance that establishes a relationship between the spot exchange rate, forward exchange rate, and the interest rates of two countries. It ensures that there is no arbitrage opportunity in the foreign exchange market. According to IRP, the forward exchange rate between two currencies should reflect the interest rate differential between the two countries. This means that if one country has a higher interest rate than another, its currency is expected to depreciate in the forward market to offset the potential gains from interest
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