It is often said that interest rate parity is satisfied when the differential between the interest rates

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It is often said that interest rate parity is satisfied when the differential between the interest rates denominated in two currencies equals the forward premium or discount between the two currencies. Explain why this is an imprecise statement when the interest rates are not continuously compounded.

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International Financial Management

ISBN: 978-0132162760

2nd edition

Authors: Geert Bekaert, Robert J. Hodrick

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