A note on IRP

When interest rate differential is not equal to forward rate differential, interest rate parity
does not exist.
While determining the arbitrage profit, the following equation should be used to find out
where should an investor borrow from and where should the investment be made-
[1+ Interest rate (country A)] = [1+ Interest rate (country B)] * [ F (A/B) / S (A/B)]

If L.H.S > R.H.S: Invest in country A and Borrow in country B

If L.H.S < R.H.S: Borrow in country A and invest in country B
Country A is usually the home country of the investor, but it is not necessary that the
information on this would be given in every question.