While almost all of the empirical literature on the interest parity puzzle has documented evidence concerning *1cov(,)ρ+−ttttEii, we recast the puzzle in terms of *1cov(,)ρ+−ttttErr. tr is the home (i.e., U.S.) ex ante real interest rate, defined as 1π+=−ttttriE, where 11π++≡−tttpp and tp denotes the log of the consumer price index in the home country. *tr is defined analogously. This is an approximation of the real interest rate. Analogous to the discussion above of the exchange rate, a different approximation would include a term for the variance of inflation. In essence, that variance is treated as a constant here