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CIMAPRO19-P03-1 Exam - Topic 3 Question 85 Discussion

Actual exam question for CIMA's CIMAPRO19-P03-1 exam
Question #: 85
Topic #: 3
[All CIMAPRO19-P03-1 Questions]

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

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

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

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Suggested Answer: B, C, D

by Kenda at Jan 15, 2025, 02:21 AM

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Cherelle
6 months ago
Definitely using interest rate parity here!
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Rikki
6 months ago
Really? 1.78? That feels a bit high.
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Miriam
6 months ago
1.67 seems too low, don’t you think?
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Jonell
7 months ago
I think it’ll be closer to 1.74.
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Lizette
7 months ago
Interest rates are 2% for the UK and 6% for the USA.
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Maurine
7 months ago
I feel like I should be able to derive the expected rate using the interest rates, but I keep mixing up the steps.
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Laurel
7 months ago
I practiced a similar question last week, and I think the answer was around 1.74, but I’m not confident about the calculations.
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Martina
8 months ago
I think the GBP/USD spot rate should increase since the US has a higher interest rate, but I can't recall how to calculate the expected rate.
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Galen
8 months ago
I remember we covered interest rate parity in class, but I'm a bit unsure about the exact formula to use for this question.
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Elsa
8 months ago
Ah, interest rate parity - I remember learning about this in class. Let me think through the logic and make sure I apply the formula correctly. I've got this!
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Asha
8 months ago
This is a classic question on interest rate parity. I'm confident I can solve this by plugging the given information into the formula and doing the math. Should be a straightforward calculation.
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Sanda
8 months ago
Okay, I think I've got this. I'll need to use the formula for interest rate parity to find the expected spot rate in six months. Let me work through the calculations step-by-step.
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Stevie
8 months ago
Hmm, I'm a bit unsure about the interest rate parity theory and how to apply it here. I'll need to review my notes to make sure I understand the concept properly.
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Jeniffer
8 months ago
This looks like a straightforward interest rate parity question. I'll need to calculate the expected spot rate based on the given interest rates.
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Charlesetta
1 year ago
Ugh, interest rate parity... the only thing more confusing than that is trying to figure out how many licks it takes to get to the center of a Tootsie Pop. Oh well, let's give this a shot!
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Gwenn
1 year ago
C) GBP/USD = 1.65
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Jerilyn
1 year ago
B) GBP/USD = 1.78
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Edna
1 year ago
A) GBP/USD = 1.74
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Huey
1 year ago
This is a piece of cake! Just plug and chug the numbers into the parity formula. I could do this in my sleep. Although, I'd probably prefer to be sleeping right now instead of taking this exam.
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Rhea
12 months ago
Great, let's go with A) GBP/USD = 1.74 then.
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Ernie
12 months ago
I think it's A) GBP/USD = 1.74 too.
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Marleen
12 months ago
A) GBP/USD = 1.74
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Cheryll
1 year ago
I bet the correct answer is C) GBP/USD = 1.65. That's the only one that seems to match the expected depreciation of the GBP based on the interest rate differential.
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Stephanie
11 months ago
Yeah, I agree with you. C) GBP/USD = 1.65 seems like the most likely scenario based on the interest rates.
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Winifred
12 months ago
I don't think so, the interest rate parity theory suggests a different depreciation for the GBP.
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Iraida
1 year ago
But what about the possibility of GBP/USD = 1.74? Could that be a potential outcome?
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Leatha
1 year ago
I think you're right, C) GBP/USD = 1.65 makes sense with the interest rate difference.
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Denae
1 year ago
Hmm, let me think this through. The UK rate is 2% and the US rate is 6%, so the interest rate differential is 4%. Using the parity formula, I'd expect the GBP to depreciate against the USD by about 4% over the 6-month period.
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Cherelle
1 year ago
This question is a classic application of interest rate parity theory. The key is to calculate the expected change in the spot rate based on the interest rate differential between the two countries.
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Candida
1 year ago
I think the answer is A) GBP/USD = 1.74.
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Gianna
1 year ago
A) GBP/USD = 1.74
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Nelida
1 year ago
So, the answer would be B) GBP/USD = 1.78, right?
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Lorrine
1 year ago
I agree, with the higher interest rate in the USA, the GBP/USD spot rate should go up.
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Rebbecca
1 year ago
I think the GBP/USD spot rate will increase.
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