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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?
Suggested Answer: A, B, D
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39 comments · newest first
HE
Helene
12 months ago
B feels right, but I’m not sure about the 2% UK inflation.
MA
Martha
12 months ago
I'm leaning towards A, seems realistic.
RO
Rolf
1 year ago
6% inflation in the USA? That seems high!
JE
Jestine
1 year ago
I think GBP/USD will actually drop, so D makes sense.
HE
Herschel
1 year ago
The inflation rates are pretty telling!
LA
Launa
1 year ago
I feel like the answer should be closer to GBP/USD1.69, but I can't remember the exact formula we used in class.
LE
Leota
1 year ago
If the UK has lower inflation, the GBP should appreciate against the USD, right? But I'm confused about how much it will change.
AL
Alona
1 year ago
I think we practiced a similar question where we calculated future exchange rates based on inflation rates. I might need to double-check my calculations.
FE
Felicidad
1 year ago
I remember that purchasing power parity adjusts for inflation differences, but I'm not sure how to apply it here.
MA
Marylyn
1 year ago
This seems straightforward - the company is looking to evaluate the success of an email marketing campaign, so the metric that would best capture that is conversions.
GO
Goldie
1 year ago
Okay, let me break this down step-by-step. I know Blue Prism processes can be exposed as web services, but I'm not sure about business objects. I'll need to double-check that.
FA
Farrah
1 year ago
I'm a bit confused by the nested loops and the way the variables are being updated. I'll need to take some time to work through this step-by-step.
TA
Tamera
1 year ago
Hmm, this seems a bit tricky. I'll need to carefully read through the question and think about what the "occurs value" means and how that relates to the input ports.
TO
Toshia
1 year ago
I'm a little confused by this question. I thought unit tests were more about checking the overall integration of a system, but I guess that's not the case. Let me re-read the options.
TH
Therese
1 year ago
No problem, I've got this! I'll just plug in the values and calculate the total interest earned over the 6 years.
BR
Brandon
1 year 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.
GI
Gianna
1 year ago
I would also go with B) GBP/USD1.73 for a more realistic expectation.
JU
Julieta
1 year ago
I agree, B) GBP/USD1.73 seems like a good choice.
AR
Arlene
1 year ago
I think B) GBP/USD1.73 is a more reasonable adjustment.
OL
Olive
1 year ago
This is a classic purchasing power parity problem. I'd be surprised if the answer isn't one of the middle options.
JE
Jerlene
1 year ago
C) GBP/USD1.77
TO
Tony
1 year ago
B) GBP/USD1.73
BE
Benton
1 year ago
A) GBP/USD1.69
WI
Winifred
2 years ago
Option D seems a bit too extreme, given the inflation rate difference. I'm leaning towards B or C.
AL
Alease
1 year ago
Yeah, D) GBP/USD1.65 does seem too extreme considering the inflation rates.
ER
Erasmo
1 year ago
I'm not sure about A) GBP/USD1.69, it seems a bit low.
MI
Milly
1 year ago
I agree, C) GBP/USD1.77 could also be a good option.
FA
Fausto
1 year ago
I think B) GBP/USD1.73 is a reasonable choice.
GI
Gilberto
1 year ago
Yeah, option D seems unlikely. B or C makes more sense given the inflation rates.
NI
Nichelle
1 year ago
I would go with option B or C as well. Option D does seem too low.
ED
Edelmira
1 year ago
I'm also leaning towards B or C. The inflation rate difference is significant.
CR
Cristal
1 year ago
I agree, option D does seem extreme. I think B or C is more likely.
KA
Kassandra
2 years 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.
RU
Rutha
2 years ago
I think the GBP/USD spot rate will remain stable at GBP/USD1.71 as the inflation rates are already priced in.
LA
Latosha
2 years ago
If inflation rates are 2% and 6% respectively, then the GBP should depreciate against the USD. I'd go with option B.
NY
Nydia
1 year ago
I agree, option B seems like the most logical answer.
LI
Ligia
1 year ago
I think option B is the best choice.
JO
Jonelle
2 years ago
I disagree, I believe the GBP/USD spot rate will increase to GBP/USD1.73 due to higher inflation in the USA.
AN
Andra
2 years ago
I think the GBP/USD spot rate will decrease to GBP/USD1.69 in three months.