If Changes in the Exchange Rate Are Determined by the Difference

question 292

Multiple Choice

If changes in the exchange rate are determined by the difference in inflation rates between two countries then ________________ holds.

• A) Relative purchasing power parity.
• B) Interest rate parity.
• C) The unbiased forward rates hypothesis.
• D) Uncovered interest parity.
• E) Triangle arbitrage.

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Definitions:

T Procedure

The T procedure, often referred to as the T-test, is a statistical test used to determine if there is a significant difference between the means of two groups which may be related in certain features.

Random Sample

A random sample is a subset of a statistical population in which each member of the subset has an equal probability of being chosen.

Average Amount

The sum of values divided by the number of values, commonly known as the mean.

Alternative Hypothesis

The alternative hypothesis is a statement in statistics that contradicts the null hypothesis and indicates that there is a significant difference between specified populations.