Which of the following statements is true?
A) Interest rate parity indicates that the forward premium or discount should be greater than the differences in the national interest rates for securities of the same maturity.
B) Purchasing power parity indicates that, in the long run, exchange rates adjust to reflect international differences in inflation so that the purchasing power of each currency tends to remain the same.
C) The International Fisher Effect indicates that the nominal interest rate should be the same all over the world at all times if the market is efficient.
D) Both B and C.
Answer: B
You might also like to view...
Which of the following are significant trade blocs in Europe?
A. The European Union and the European Free Trade Association B. The European Federation and the European Trade Block C. The European Commission and the COMINTERN D. The European Federation and the European Trade Association E. The European Economic Community and the European Federation
If you set your calculator to the "end" mode your calculator will assume cash flows occur at the end of each time period
Indicate whether this statement is true or false.