A Theory That Relates the Ratios of Spot and Forward

question 4

Multiple Choice

A theory that relates the ratios of spot and forward exchange to differences in interest rates in two countries or currency zones is known as [blank].

• A)interest rate parity
• B)purchasing-power parity
• C)bid-ask spread
• D)forward/spot equivalence hypothesis

---

Definitions:

Event Nodes

Elements in a graph or network representing moments or occurrences, often used in event-driven modeling or decision analysis.

Event Nodes

Points in a decision tree where outcomes of a particular decision or chance event are shown.

Decision Tree

A graphical representation used to make decisions and show the possible outcomes, including chance event outcomes, resource costs, and utility.

R&D Process

The sequence of activities or steps that an organization follows to conceive, design, develop, and bring to market new products or services, often involving scientific research and technological development.