Covered Interest Rate Parity Question

Although it is quite late to say this but thank you edulima……. I had been trying to figure this out for sometime. 🙂

Hi @GraemeA, try the following:

Start with the first formula and subtract S_f/d from both sides. The left-hand side is obvious; in the right-hand side, factor out S_f/d and you are left with a fraction that looks like (for more clarity I omitted the “Actual/360” from the notation):

(1+if)/(1+id) -1, which equals [(1+if) – (1+id)]/(1+id), which in turn reduces to (if – id)/(1 + id).

Hope this helps!

I should start my revision….. 🙁