The article explores how interest rates and exchange rates are connected, and how they adjust to reach balance in financial markets. It shows how covered interest arbitrage works and discusses why interest rate parity doesn't always hold true in the real world. It explains the difference between nominal and real interest rates, and how inflation affects interest rates. The Fisher equation and interest parity equation are used to show how interest rates, inflation, and exchange rates are related. The term structure of interest rates, which is the pattern of interest rates over time, is also discussed, along with different theories that explain it.