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Question 2 : Which of the following theories relates spot and forward exchange rates? Relative purchasing power parity Interest rate parity Absolute purchasing power parity

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2

Which of the following theories relates spot and forward exchange rates?

Relative purchasing power parity

Interest rate parity

Absolute purchasing power parity

The law of one price

Question

3

The exchange rate of the GBP against USD will adjust to reflect changes in the price levels of the two countries.

This is known as

Relative purchasing power parity

Interest rate parity

Absolute purchasing power parity

Arbitrage

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