1. Which of the following is not true regarding limitations of PPP and the IFE?

a. A limitation of the IFE is that the determination of the expected inflation rate is subject to error.

b. A limitation of the PPP and the IFE (because it relies on the PPP) is that other country characteristics besides inflation can affect exchange rate movements.

c. A limitation in testing PPP is that the results will vary with the base period used.

d. All of these choices are true

2. When using ____, funds are typically tied up for a significant period of time

a. triangular arbitrage

b. locational arbitrage

c. covered interest arbitrage

d. "locational arbitrage" and "triangular arbitrage"