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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Brandon

2 months ago

Expecting the Pound to drop like a rock? Nah, this isn't the 70s, mate. I'd go with B for a more reasonable adjustment.

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Gianna

7 days ago

I would also go with B) GBP/USD1.73 for a more realistic expectation.

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Julieta

8 days ago

I agree, B) GBP/USD1.73 seems like a good choice.

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Arlene

25 days ago

I think B) GBP/USD1.73 is a more reasonable adjustment.

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Olive

2 months ago

This is a classic purchasing power parity problem. I'd be surprised if the answer isn't one of the middle options.

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Jerlene

10 days ago

C) GBP/USD1.77

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Tony

17 days ago

B) GBP/USD1.73

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Benton

25 days ago

A) GBP/USD1.69

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Winifred

2 months ago

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

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Alease

2 hours ago

Yeah, D) GBP/USD1.65 does seem too extreme considering the inflation rates.

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Erasmo

2 days ago

I'm not sure about A) GBP/USD1.69, it seems a bit low.

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Milly

3 days ago

I agree, C) GBP/USD1.77 could also be a good option.

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Fausto

5 days ago

I think B) GBP/USD1.73 is a reasonable choice.

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Gilberto

7 days ago

Yeah, option D seems unlikely. B or C makes more sense given the inflation rates.

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Nichelle

8 days ago

I would go with option B or C as well. Option D does seem too low.

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Edelmira

11 days ago

I'm also leaning towards B or C. The inflation rate difference is significant.

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Cristal

16 days ago

I agree, option D does seem extreme. I think B or C is more likely.

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Kassandra

2 months 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

2 months 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

2 months 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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Nydia

1 months ago

I agree, option B seems like the most logical answer.

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Ligia

1 months ago

I think option B is the best choice.

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Jonelle

2 months 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

2 months ago

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

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