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22. Which of the following statements are correct concerning the foreign exchange market?I. The trading floor of the foreign exchange market is located in London, England.II. The foreign exchange market is the world's largest financial market.III. The four primary currencies that are traded in the foreign exchange market are the U.S. dollar, the British pound, the Canadian dollar, and the euro.IV. Importers and exporters are key players in the foreign exchange market. A. I and III onlyB. II and IV onlyC. I and II onlyD. III and IV onlyE. I and IV only23. Triangle arbitrage:I. is a profitable situation involving three separate currency exchange transactions.II. helps keep the currency market in equilibrium.III. opportunities can exist in either the spot or the forward market.IV. only involves currencies other than the U.S. dollar. 24. Spot trades must be settled: 31-6
Chapter 31 - International Corporate Finance25. Assume that the Euro is selling in the spot market for $1.10. Simultaneously, in the 3-month forward market the Euro is selling for $1.12. Which one of the following statements correctly describes this situation? 26. Which of the following conditions must exist for absolute purchasing power parity to hold?I. the goods are identicalII. the goods have equal economic valuesIII. transaction costs are equal to zeroIV. there are no trade barriers A. I and III onlyB. II and IV onlyC. I, III, and IV onlyD. I, II, and III onlyE. I, II, III, and IV27. Relative purchasing power parity: