1. When the a transaction involves the purchase and sale of three different currencies so that the person conducting the transaction begins with a specific amount of one currency and ends with a greater amount of that currency, the transaction is: a three-party currency exchange. b. a currency market currency swap. c. illegal unless approved by the countries issuing the currency involved. d. an example of triangular arbitrage. 2. The effect of arbitrage transactions on markets can best be described as: a. currency and money markets will be destabilized. b. those who need currencies for business and trade purposes will be excluded form the markets. c. interest rates and values of the currencies involved will tend to converge. d. regulators will eventually restrict the ability to engage in arbitrage transactions. 3. A country's capital controls can affect interest rate parity by: a. causing interest rates to be higher independent of the forward premium of the country's currency. b. limiting foreign investment in the country so that interest rates are artificially reduced. c. limiting foreign investment in the country so that interest rates are artificially increased. d. causing the forward premium of the country's currency to be increased without regard to the real value of the currency. 4. Absolute purchasing power parity requires that: a. government regulations assure that prices for goods are the same in all locations. b. the law of one price be in place and result in prices for goods in one location be equivalent to the price of those goods in another place. c. markets function efficiently so that the price of goods are the same everywhere they are sold. d. goods markets function efficiently and the price of goods fluctuate