Discount rate and interest relationship with currency

discount rate and interest relationship with currency

The profit-seeking arbitrage activity will bring about an interest parity relation- ship between interest rates of two countries and exchange rate between these countries. to the forward premium or discount on the Yen. • Example: i$ = 5%, iY. Interest rates and bond prices have an inverse relationship; so when one at a lower price—a discount—that would enable it to generate approximately 8% to. This adjusts the federal funds rate -- what banks charge one another for short- term loans. The Fed can also adjust the discount rate, which is the interest rate it .

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discount rate and interest relationship with currency

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discount rate and interest relationship with currency