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What Is the Logic Behind the Theory of Purchasing-Power Parity

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What is the logic behind the theory of purchasing-power parity?


Definitions:

Dividends

Dividends issued by a firm to its investors, typically funded by the company’s profit.

Capital Gains Yield

The price appreciation component of the total return on an investment, expressed as a percentage of the initial investment cost.

Constant Rate

A steady, unchanging rate of growth or decline, often used in the context of compounding interest or depreciation.

Expected Growth Rate

The projected annual rate at which an investment or a company's earnings are expected to grow.

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