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If rf and rd are the interest rates of a foreign country and domestic country, respectively and if $${S_{\frac{F}{D}}}$$ and $${S_{\frac{F}{D}}}$$ are spot exchange rate and forward exchange rate between the countries F and D, the interest rate parity is indicated by

If rf and rd are the interest rates of a foreign country and domestic country, respectively and if $${S_{\frac{F}{D}}}$$ and $${S_{\frac{F}{D}}}$$ are spot exchange rate and forward exchange rate between the countries F and D, the interest rate parity is indicated by Correct Answer $$\frac{{\left( {1 + {r_f}} \right)}}{{\left( {1 + {r_d}} \right)}} = \frac{{\frac{{{f_F}}}{D}}}{{\frac{{{S_F}}}{D}}}$$

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