1. A country’s capital controls can affect interest rate parity by:

a. causing interest rates to be higher independent of the forward premium of the country’s currency.

b. limiting foreign investment in the country so that interest rates are artificially reduced.

c. limiting foreign investment in the country so that interest rates are artificially increased.

d. causing the forward premium of the country’s currency to be increased without regard to the real value of the currency.

 

Answer rating: 100% (QA)

Interest Rate Parity IRP theory postulates that the difference in interest rates between two countries should be equal to the difference between the f... View the full answer