1. Which one of these must be true if absolute purchasing power parity is to absolutely hold?

The goods traded must have a feature unique to each individual market.

Forward rates must equal spot rates.

Transaction costs must be imposed on both ends of a trade.

There must be greater demand for the item in one area as compared to another area.

Customer preferences for an item must be identical across markets.

2. Which of the following would increase the price of a stock?

A. An increase in the market risk premium

B. An increase in the growth rate of the stock

C. An increase in the risk-free rate

D. An increase in the beta of the stock