Which of the Following Parity Conditions Is (Are)correct

question 60

Multiple Choice

Which of the following parity conditions is (are) correct?

• A) The interest-rate parity theory states that the forward premium/discount should be equal and opposite in size to the national interest rate differential.
• B) The purchasing-power parity theory states that in the long run exchange rate changes tend to reflect international differences in inflation rates.
• C) The international Fisher effect states that national interest rate differentials are the result of inflation differentials.
• D) All of the above are correct.

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