Which Theory States That a Forward Exchange Rate Is Given

question 46

Multiple Choice

Which theory states that a forward exchange rate is given by relative interest rates in the two currencies?

• A)Interest rate parity.
• B)Purchasing power parity.
• C)International fisher effect.
• D)Unbiased forward rates.

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Definitions:

Resistance Level

A price point on a stock chart where selling pressure is thought to exceed buying pressure, making it difficult for the price to rise further.

The Dow Line

A reference to Dow Theory, focusing on the movements of the Dow Jones Industrial Average to predict market trends.

Put/call Ratio

A indicator measuring the trading volume of put options to call options, used to gauge investor sentiment in the market.

Bearish Signal

An indicator or trend suggesting that the price of an investment is likely to decrease.