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Basic Question 8 of 27
Which statement(s) is (are) false regarding relative PPP?
II. It states that exchange rates between home and foreign currencies adjust to reflect changes in price levels in each country.
III. It implies that price levels should be equal worldwide.
I. It implies that the real return on an asset is identical for investors from any country.
II. It states that exchange rates between home and foreign currencies adjust to reflect changes in price levels in each country.
III. It implies that price levels should be equal worldwide.
User Contributed Comments 1
| User | Comment |
|---|---|
| quanttrader | absolute ppp: price levels should be equal worldwide relative ppp: exchange rates adjust to difference in coutnries' inflation |
I passed! I did not get a chance to tell you before the exam - but your site was excellent. I will definitely take it next year for Level II.
Tamara Schultz
Learning Outcome Statements
explain international parity relations (covered and uncovered interest rate parity, forward rate parity, purchasing power parity, and the international Fisher effect);
describe relations among the international parity conditions;
evaluate the use of the current spot rate, the forward rate, purchasing power parity, and uncovered interest parity to forecast future spot exchange rates;
explain approaches to assessing the long-run fair value of an exchange rate;
CFA® 2025 Level II Curriculum, Volume 1, Module 8.