liquidity

the r in interest rate parity is nominal return.

$/L *(1+Nominal return $)/(1+Nominal Return) = Forward $/L


i think this idea also is that real rates accross borders are all equal (if they werent, then investors would flood the country with higher rates, setting them to equilibrium). So real rates are assumed to be equal accross countries, then differences in nominal yields are due to inflation. I think that makes sense.