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CIMAPRO19-P03-1 Exam - Topic 2 Question 105 Discussion

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?
B) GBP/USD1.73
A) GBP/USD1.69
C) GBP/USD1.77
D) GBP/USD1.65

CIMAPRO19-P03-1 Exam - Topic 2 Question 105 Discussion

Actual exam question for CIMA's CIMAPRO19-P03-1 exam
Question #: 105
Topic #: 2
[All CIMAPRO19-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?

Show Suggested Answer Hide Answer
Suggested Answer: B

by Johana at May 02, 2026, 10:26 AM

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Denae
10 hours ago
I just want to get it right!
upvoted 0 times
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Giovanna
6 days ago
D feels too low for me.
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Isidra
11 days ago
C seems too high.
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Arlie
16 days ago
I might go for B) GBP/USD1.73.
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Denae
21 days ago
I’m leaning towards A) GBP/USD1.69.
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Giovanna
26 days ago
So, GBP should weaken, right?
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Isidra
1 month ago
Yeah, UK is lower than the US.
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Arlie
1 month ago
I think it’s about inflation rates.
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Denae
1 month ago
This question is tricky.
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Na
2 months ago
Not sure about that, I think it might drop more.
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Erick
2 months ago
I'm leaning towards option B, feels right.
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Isadora
2 months ago
6% inflation in the USA? That seems high!
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Oretha
2 months ago
I think the GBP will strengthen a bit.
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Francoise
2 months ago
Inflation in the UK is lower than in the USA.
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Barrie
2 months ago
I think I remember that we need to calculate the expected rate based on the inflation rates, but I can't remember if that means we should choose A or D.
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Adolph
4 months ago
I feel like the answer should be lower than 1.71 because of the higher inflation in the USA, but I'm not confident about the exact calculation.
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Asha
4 months ago
I think we practiced a similar question where we had to adjust for inflation rates. If I recall correctly, the formula involves the current spot rate and the inflation differential.
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Victor
4 months ago
I remember we discussed purchasing power parity in class, but I'm not entirely sure how to apply it to this specific question.
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