The Theory of ________ States That the Difference in the National

question 9

Multiple Choice

The theory of ________ 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

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Definitions:

Rapid City Flood

A catastrophic flood event that occurred in Rapid City, South Dakota, in 1972 due to heavy rainfall.

Flash Flood

A local and sudden flood of short duration, such as that which may follow a brief but heavy rainfall.

Global Warming

Increasing global atmospheric and oceanic temperatures as measured or inferred from some point in the past to the present.

Lithosphere

The rigid outer layer of the earth, including the crust and upper mantle, which is divided into tectonic plates.