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CIMA Financial Strategy F3 Question # 91 Topic 10 Discussion

CIMA Financial Strategy F3 Question # 91 Topic 10 Discussion

F3 Exam Topic 10 Question 91 Discussion:
Question #: 91
Topic #: 10

The long-term prospects for inflation in the UK and the USA are 1% and 4% per annum respectively.

The GBP/USD spot rate is currently GBP/USD1.40

Using purchasing power parity theory, what GBP/USD spot rate would you expect to see in six months’ time?


A.

GBP/USD1.38


B.

GBP/USD1.44


C.

GBP/USD1.42


D.

GBP/USD1.36


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