Explain the purchasing power parity, Financial Management

Assignment Help:

Explain the purchasing power parity, both of the absolute and relative versions. What causes the deviations from the purchasing power parity?

Answer:  The absolute version of purchasing power parity abbreviated as PPP:

          S = P$/P£.

The relative version is:

          e = p$ - p£.

PPP or purchasing power parity can be violated if there are barriers to international trade or if people in dissimilar countries have different consumption taste. PPP is the law of one price useful to a standard consumption basket.


Related Discussions:- Explain the purchasing power parity

Leverage, evaluate the importace of leverage in financial management of a s...

evaluate the importace of leverage in financial management of a small scale company

Analyse the corporate governance issues facing x company, M has recently jo...

M has recently joined the board of X Company, a main listed confectionary manufacturer. The company was established as a family business over a century ago and members of the found

Review of financial research report, This assignment is an analysis of a U....

This assignment is an analysis of a U.S. publicly-traded company; its common stock could be a prospective investment. The report is due in Week 10, in needs to be at least 5 pages

Explain the reconstruction and effect on share price, Reconstruction and ef...

Reconstruction and effect on share price A listed company facing reconstruction (divestment, demerger, MBO etc) will have informed the stock market in advance and the share pri

Non-agency mortgage backed securities, The mortgage-backed securiti...

The mortgage-backed securities dealt with till now are agency mortgage backed securities. There are other MBS which can be for any kind of real estate property.

Elements of financial management, Elements of Financial Management: Fin...

Elements of Financial Management: Financial management is the term given to the overall management of an organisation's finances. It includes a number of elements, or systems,

Find the minimum earnings, Milan Corporation is interested in buying a mach...

Milan Corporation is interested in buying a machine that will cost $50,000, and it will depreciate it on straight-line basis over a 5-year period. The machine is expected to last f

Concepts of working capital, CONCEPTS OF WORKING CAPITAL There are two ...

CONCEPTS OF WORKING CAPITAL There are two concepts of Working Capital - Net working capital and Gross Working capital. 1. Gross Working Capital Gross Working capital re

Define mutually exclusive projects, Provide three examples of mutually excl...

Provide three examples of mutually exclusive projects. Mutually exclusive projects are projects which participate against each other for our selection.  If a organization and fir

Explain and compare the costs of hedging, Explain and compare the costs of ...

Explain and compare the costs of hedging via the forward contract and the options contract. Answer: There is no up-front cost of hedging through forward contracts. Though, in t

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd