CIMA Exam CIMAPRA19-P03-1 Topic 2 Question 25 Discussion

Actual exam question for CIMA's CIMAPRA19-P03-1 exam

Question #: 25
Topic #: 2

[All CIMAPRA19-P03-1 Questions]

The long-term prospects for inflation in the UK and the USA are 2% and 6% per annum respectively.

The GBP/USD spot rate is currently GBP/USD1.71.

Usingpurchasingpowerparitytheory, what GBP/USD spot rate would you expect to see inthree months' time?

AGBP/USD1.69

BGBP/USD1.73

CGBP/USD1.77

DGBP/USD1.65

Show Suggested Answer

Suggested Answer: A, B, D

by Nana at Mar 24, 2023, 08:53 AM

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Winifred

4 days ago

Option D seems a bit too extreme, given the inflation rate difference. I'm leaning towards B or C.

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Kassandra

7 days ago

Hmm, this one's tricky. I'd need to double-check my purchasing power parity calculations, but I think option C looks about right.

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Rutha

11 days ago

I think the GBP/USD spot rate will remain stable at GBP/USD1.71 as the inflation rates are already priced in.

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Latosha

12 days ago

If inflation rates are 2% and 6% respectively, then the GBP should depreciate against the USD. I'd go with option B.

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Jonelle

14 days ago

I disagree, I believe the GBP/USD spot rate will increase to GBP/USD1.73 due to higher inflation in the USA.

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Andra

20 days ago

I think the GBP/USD spot rate will decrease to GBP/USD1.69 in three months.

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