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Theory of Purchasing Power Parity

Assignment Help Business Economics
Reference no: EM133227534

Question 1. According to Efficient Market theories, the most sensible strategy for stock investors is a 'buy and hold' strategy

True

False

Question 2. If British prices rise by 4% relative to the price level in Canada, what does the theory of Purchasing Power Parity (PPP) predict will happen to the value of the British pound in terms of Canadian dollars?

a. The British pound will rise by 4 percent

b. The Canadian dollar rise by 2 percent and the British pound will fall by 2%

c. There is no relationship

d. The British pound will fall by 4 percent

Question 3. The exchange rate is ________.

a. The price of one currency relative to gold

b. The value of a currency relative to inflation

c. The change in the value of money over time

d. The price of one currency relative to another

Question 4. The Price Earnings ratio (P/E ratio) of a company _________.

a. Indicates how much the market will pay for each dollar of future earnings

b. Indicates how well the company can afford to take on new debt

c. Is a good tool to measure a company across a variety of industries

d. All of the above

Reference no: EM133227534

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