Corporate finance chapter 21 Questions and answer

triangle arbitrage - -the act of exchanging through three currencies to exploit a mispriced trio of currency quotes -spot trade - -exchange currency immediately -spot rate - -the exchange rate for an immediate trade -forward trade - -agree today to exchange currency at some future date and some specified price -forward rate - -the exchange rate specified in the forward contract -if the forward rate is higher than the spot rate the foreign currency is what? - -selling at a premium ( when quoted as $ equivalents) -If the forward rate is lower than the spot rate the foreign currency is what? - -selling at a discount -absolute purchasing power parity - -Price of an item should be the same in real terms, regardless of the currency used to purchase it -what are the requirements of absolute purchasing power parity - -no transaction costs no barriers to trade no difference in the commodity between