Reading 19: Foreign Exchange Parity Relations - LOS L ～ Q likely, failure, Foreign, absolute, following

mayanfang1

Q11. Which of the following is least likely a valid reason for the failure of absolute PPP?

A)   forward rates are unreliable and thin.

B)   differences in taxes, labor, and transportation costs between countries.

C)   consumers do not have the same basket of goods and services.

Q12. Muller observes that the $/

mayanfang1

答案和详解如下：

Q11. Which of the following is least likely a valid reason for the failure of absolute PPP?

A)   forward rates are unreliable and thin.

B)   differences in taxes, labor, and transportation costs between countries.

C)   consumers do not have the same basket of goods and services.

Correct answer is A)

Forward rates, and the liquidity of the forward market will not have a bearing on the correctness of absolute PPP. The other items listed will cause actual exchange rates to deviate from what is predicted by absolute PPP.

Q12. Muller observes that the $/

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