Finance

One important reason to study the purchasing power parity theory is be

One important reason to study the purchasing power parity theory is because A) investors should borrow in a foreign currency, when there is a forward discount. B) when inflation rates differ across international borders, PPP provides a baseline forecast of future exchange rates. C) forecasting exchange rates is difficult and PPP makes it easier. D) […]

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Date: September 19th, 2020

Understanding the theory of purchasing power parity is important becau

Understanding the theory of purchasing power parity is important because deviations from PPP significantly affect the A) operations of the central bank. B) hedging activities of multinational firms. C) profitability of multinational firms. D) arbitrage opportunities in the banking markets.     ANSWER Answer: C

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Date: September 19th, 2020

To determine the risk premium associated with an asset’s expected retu

To determine the risk premium associated with an asset’s expected return, two components of the return are usually cited, only the first, the covariance of the asset’s return with the market portfolio, is used, because ________. A) the risk associated with the asset depends on the market risk B) it is the only part of […]

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Date: September 19th, 2020