According to Interest Rate Parity, *real* interest rates must be the same across currencies. So, any differences in *nominal* interest rates must be due to expected appreciation or depreciation.

For instance, say EUR rates are 5% and USD rates are 2%. Does this mean we should only put money in EUR? No, according to interest rate parity, which says that EUR is expected to depreciate 3%. So, USD or EUR rates will end up with the same return in real terms.

In real life, interest rate parity does not always work, especially in the short term. In real life, high interest rates attract capital inflows, particularly in the short term. BRL is a good example of this happening in real life. However, if CFAI will want to test you on the concept of interest rate parity, so you should understand this, even if it is just a model.