1. Money

What is an interest rate differential?

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Question: What is an interest rate differential?
Answer:

An interest rate differential is the difference in interest rate between two currencies in a pair. If one currency has an interest rate of 3 percent an the other has an interest rate of 1 percent, it has a 2 percent interest rate differential.

If you were to buy the currency that pays 3 percent against the currency the pays 1 percent, you wouldbe paid on the difference with daily interest payments.

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