Relative PPP links changes in the exchange rate to
Anational inflation rates
Bshare dividend yields
Ctrade balances only
Dincome tax slabs
Answer & Solution
Correct answer: A. national inflation rates
Relative PPP is a weaker statement covering changes in the exchange rate and inflation rates.
Keep practising Foreign Exchange Exposure and Risk Management
Browse all Foreign Exchange Exposure and Risk Management questions for CA Final, or explore more Strategicfinancialmanagement topics.
Related questions
European banks may use their own VaR models to setUnder the Bretton Woods system, many businessesA shift in exchange rates that changes demand for a good sold abroad is an example ofEconomic risk of foreign investment includes exchange rates, regulation andFutures cannot fully mitigate currency risk as they exist only forForward and futures contracts are similar in that bothThe Garman-Kohlhagen formula needs two interest rates becauseThe value of a European FX option is typically computed assuming the exchange rate follows