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

What is lending system, Q. What is Lending System? Under the note lendi...

Q. What is Lending System? Under the note lending system, the borrower takes a loan, usually of 90 days Duration, against a promissory note. The loan may be renewed or retired

Determine the calculations for the cash flows, The calculations for the cas...

The calculations for the cash flows Actual amount of cash paid or received during the period needs to be established. This can get quite  tricky  as  there  would be  accruals

Evaluate the vulnerability, Assume you are a professional financial analyst...

Assume you are a professional financial analyst working for a wealthy investor.  Your client has $2.6 million to invest and wants to sink it into a single stock (diversification is

MIS, evaluation and maintenance of MIS

evaluation and maintenance of MIS

Computation of overall cost of capital, Q. Computation of overall Cost of C...

Q. Computation of overall Cost of Capital? Computation of Value of the Firm (V) & Overall Cost of Capital when debt is lowered to Rs, 1, 00,000 When the debt is lowered to R

How do risk-averse investors compensate, How do risk-averse investors compe...

How do risk-averse investors compensate for risk when they take on investment projects? For the reason of risk aversion, people demand elevated rates of return for taking on hi

Monthly cash flow, I need to prepare a monthly cash flow for a company with...

I need to prepare a monthly cash flow for a company with the given information, and need to comment on the current performance and the future sales increment. Then we need to find

Illustrate the capital markets in maturity of the securities, Illustrate th...

Illustrate the capital markets in maturity of the securities? On the basis of the maturity of the securities traded, capital markets can be introduced here: Capital markets

Explain the term - timing of benefits, Explain the term - Timing of Benefit...

Explain the term - Timing of Benefits A more significant technical objection to profit maximisation, as a guide to financial decision making, is that it ignores the differen

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