Free CIMAPRO19-P03-1 Exam braindumps download (CIMAPRO19-P03-1 exam dumps Free)

QUESTION: 116

DFG's home currency is the D$.
DFG is heavily exposed to the exchange rate between the D$ and the L$, country L's currency. DFG's treasurer has noted the following:
· Inflation has been running at 5% in DFG's home country and 8% in country L · Interest rates are 7% in DFG's home country and 11% in country L · The spot rate is D$1.0000 = L$2.1000 and the three month forward rate is D$1.0 = L$2.1196 Which of the following statements is consistent with these figures?

Interest rates are expected to continue unchanged, but country L's inflation rate will increase in proportion to the inflation rate in DFG's home country.
Interest rates are expected to continue unchanged, but country L's inflation rate will decrease in proportion to the inflation rate in DFG's home country.
Country L's interest rate is expected to decline relative to that of DFG's home country and inflation rates are expected to continue unchanged.
Country L's interest rate is expected to increase relative to that of DFG's home country and inflation rates are expected to continue unchanged.

Answer(s): A

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QUESTION: 117

Which of the following summarises Purchasing Power Parity Theory (PPPT)?

Government intervention cannot affect the inevitable rise or fall of its currency in the short-term.
The difference between the spot and the forward exchange rates is equal to the differential between the inflation rates in the two countries.
PPPT predicts that the country with the lower inflation rate will see the currency devalue accordingly.
The difference between the interest rates in the two countries is equal to the differential between the spot and the forward exchange rate for the currency in the two countries.

Answer(s): B

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QUESTION: 118

A US company has to pay £500,000 for a new machine.
You have the following information on currencies.
EUR 1 = £1.2300
EUR 1 = USD 1.6200
What is the cost of the machine in USD?
Give your answer to the nearest $.

$658501, $658537

Answer(s): A

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QUESTION: 119

A US company enters into a five year borrowing with bank A at a floating rate of USD Libor plus 2%. It simultaneously enters into an interest rate swap with bank B at 3.5% fixed against USD Libor plus 1%.
What is the hedged borrowing rate, taking the borrowing and swap into account? Give your answer to 1 decimal place