Like most classic relationships in economics, the IRP
relationship has its origins in the writings of the early political
economists of the nineteenth century. It was John
Maynard Keynes, however, who popularized the expression.
In its most general form, IRP considers the
returns available to investors (or, equivalently, the funding
costs available to borrowers) from the following
three related alternatives:
Alternative 1: Borrowing or lending in domestic
currency at rate: