# Interest Rate Parity Principle Interest Rate Parity Principle (InterestRateParity) What is the Eastforexcashback East forex cashback parity principle The interest rate parity principle is an extension of the Fisher effect in international markets, which states that the ratio between the forward and forexcashbackcalculator exchange rates will be equal to the ratio between the domestic aggregate interest rate and the cashbackforexbtc aggregate interest rate The formula of the interest rate parity principle is expressed in the following formula: where: XF cashback forex the current forward rate expressed in foreign currency units per dollar; XO - the current forward rate expressed in foreign currency units per dollar; Ef - the current forward rate expressed in foreign currency units; Ef - the current forward rate expressed in foreign currency units per dollar; Ef - the current forward rate expressed in foreign currency units; Ef - the current forward rate expressed in foreign currency units. --XO - the foreign currency unit per dollar expressed by the current forward rate; Ef - the dollar value per unit of foreign currency expressed by the current forward rate; Ef - the dollar value per unit of foreign currency expressed by the current forward rate EO - the dollar value of each foreign currency unit expressed by the current current exchange rate RfO - the current foreign nominal interest rate Rdo - the current domestic nominal interest rate -For example, if the domestic interest rate is 16%, the foreign interest rate is 14%, and the current exchange rate is XO=10% then the forward exchange rate is: The relationship between the forward and current exchange rates as stated by the principle of interest rate parity can be illustrated by the diagram. The ratio between foreign and domestic interest rates rises at the bend point where the relative expected number of foreign currency per - dollar rises, the ratio between foreign interest rates, and domestic interest rates is at its peak when the rate per unit of domestic currency expected foreign currency unit falls, reconstructing the former ratio between foreign and domestic interest rates