Distinguish between the following: 'Interest rate parity' and 'purchasing power parity'.

Interest Rate Parity: According to Interest Rate Parity Principle, the forward premium (or discount) on currency of a country vis-à-vis the currency of another country will be exactly offset by the interest rate differential between the countries. The currency of the country with lower interest rate is quoted at a forward premium and vice versa. Purchasing Power Parity: According to the Purchasing Power Parity (PPP) Principle, the currency of a country will depreciate vis-à-vis the currency of another country on the basis of differential in the rates of inflation between them. The rate of depreciation in the currency of a country would roughly be equal to the excess inflation rate in the country over the other country.