Even Though UIP Is Shown to Hold Within a Small

question 117

Multiple Choice

Even though UIP is shown to hold within a small range on average, some deviations allow systematic profits to be made. This violates all of the following principles, EXCEPT:

• A) rational expectations with no systematic bias.
• B) efficient markets hypothesis, which postulates that all traders are operating with the same information.
• C) random deviations in exchange rates around their mean.
• D) rational expectations with systematic bias.

---

Definitions:

Carrying Value

The book value of an asset or liability on a company's balance sheet, taking into account depreciation, amortization, and impairment charges.

Noncontrolling Interest

An ownership position in which a shareholder owns less than 50% of a company's stock and therefore has no control over decisions.

Consolidated Statement

A financial statement that presents the assets, liabilities, and operating results of a parent company and its subsidiaries as one single entity.

Cash Flows

The total amount of money being transferred into and out of a business, providing insights into its operational efficiency and financial health.