1.One of the criticisms of interest rate parity is that it cannot be adjusted to account for market imperfections like transactions costs.

True

False

2.IRP suggests that forward premiums and discounts should approximately equal the interest rate differential between two countries.

True

False

3.One reason that relative PPP might not hold is that substitute goodsmay not exist between nations.

True

False

4.The International Fisher Effect assumes that absolute PPP holds.

True

False

5.The domestic Fisher effect assumes there is a negative relationship between changes in the nominal interest rate and changes in expected inflation.

True

False