¹ú¼Ê½ðÈÚ_International_Finance_Test_Bank_08 - Chapter...

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Chapter 8—Relationships among Inflation, Interest Rates, and Exchange Rates1.Assume a two-country world: Country A and Country B. Which of the following is correct aboutpurchasing power parity (PPP) as related to these two countries?a.If Country A's inflation rate exceeds Country B's inflation rate, Country A's currency willweaken.b.If Country A's interest rate exceeds Country B's inflation rate, Country A's currency willweaken.c.If Country A's interest rate exceeds Country B's inflation rate, Country A's currency willstrengthen.d.If Country B's inflation rate exceeds Country A's inflation rate, Country A's currency willweaken.ANS: APTS:1
2.Given a home country and a foreign country, purchasing power parity (PPP) suggests that:PTS:1
3.The international Fisher effect (IFE) suggests that:PTS:1
4.Because there are a variety of factors in addition to inflation that affect exchange rates, this will:PTS:1
5.Because there are sometimes no substitutes for traded goods, this will:a.reduce the probability that PPP shall hold.b.increase the probability that PPP shall hold.c.increase the probability the IFE will hold.d.B and CANS: APTS:1
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6.According to the IFE, if British interest rates exceed U.S. interest rates:PTS:1

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The document you are viewing contains questions related to this textbook.
Fundamentals of Financial Management
The document you are viewing contains questions related to this textbook.
Chapter 19 / Exercise 19-15
Fundamentals of Financial Management
Brigham
Expert Verified

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