Interest Rate Parity, Forward Rates & International Fisher Effect


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question 1 of 3

The value of one currency against another is which of the following?

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1. Which of the following is the term for the current exchange rate?

2. Matilda's investments in Russia earn 7% less than in Nigeria. The spot exchange rate between the two countries is likewise 7%. This is an example of which of the following?

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About This Quiz & Worksheet

As you may know, different forms of national currencies have different values. This assessment will test your understanding of how you can compare these values and how they are affected by interest rates.

Quiz & Worksheet Goals

This assessment will ask you questions regarding:

  • Comparing the values of different currencies
  • Different types of exchange rates
  • Comparing interest rates of two countries
  • Markets and uncovered interest rates
  • Trading money across different currencies for profit

Skills Practiced

Some of the skills covered with this assessment include:

  • Interpreting information- verify that you can read and correctly interpret information regarding exchange rates
  • Information recall - access the knowledge you've gained regarding the various types of exchange rates and interest
  • Knowledge application - use your knowledge to answer questions about making profit off of exchange rates and interest

Additional Learning

To reinforce your understanding of the material covered in the assessment and more, study the lesson Interest Rate Parity, Forward Rates & International Fisher Effect. With this lesson, you will also learn about:

  • The differences between spot and forward exchange rates
  • How the international Fisher effect works
  • Examples of interest arbitrage