Which of the following is NOT true regarding nondeliverable forward $($NDF$)$ contracts?

A$)$ NDFs are used primarily for emerging market currencies.

B$)$ Pricing of NDFs reflects basic interest rate differentials plus an additional premium charged for dollar settlement.

C$)$ NDFs can only be traded by central banks.

D$)$ NDFs are contracted offshore.

If an identical product can be sold in two different markets, and no restrictions exist on the sale or transportation of product between markets, the product's price should be the same in both markets. This is known as:

A$)$ relative purchasing power parity.

B$)$ interest rate parity.

C$)$ the law of one price.

D$)$ equilibrium.

$q,$ states that differential rates of inflation between two countries tend to be offset over time by an equal but opposite change in the spot exchange rate.

A$)$ The Fisher Effect

B$)$ The International Fisher Effect

C$)$ Absolute Purchasing Power Parity

D$)$ Relative Purchasing Power Parity

Exchange rate pass$-$through may be defined as:

A$)$ the bid$/$ask spread on currency exchange rate transactions.

B$)$ the degree to which the prices of imported and exported goods change as a result of exchange rate changes.

C$)$ the PPP of lesser$-$developed countries.

D$)$ the practice by Great Britain of maintaining the relative strength of the currencies of the Commonwealth countries under the current floating exchange rate regime.

The theory of $q,$ states that the difference in the national interest rates for securities of similar risk and maturity should be equal to but opposite in sign to the forward rate discount or premium for the foreign currency, except for transaction costs.

A$)$ international Fisher Effect

B$)$ absolute PPP

C$)$ interest rate parity

D$)$ the law of one price

Covered interest arbitrage moves the market $q,$ equilibrium because $q,\_.$

A$)$ toward; purchasing a currency on the spot market and selling in the forward market narrows the differential between the two

B$)$ toward; investors are now more willing to invest in risky securities

C$)$ away from; purchasing a currency on the spot market and selling in the forward market increases the differential between the two

D$)$ away from; demand for the stronger currency forces up interest rates on the weaker security