Free CIMAPRO19-P03-1 Exam Braindumps (page: 31)

Page 30 of 69

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

  1. Government intervention cannot affect the inevitable rise or fall of its currency in the short-term.
  2. The difference between the spot and the forward exchange rates is equal to the differential between the inflation rates in the two countries.
  3. PPPT predicts that the country with the lower inflation rate will see the currency devalue accordingly.
  4. 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



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 $.

  1. $658501, $658537

Answer(s): A



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

  1. 4.5%

Answer(s): A



Which of the following statements are true of economic risk?

  1. Economic risk is easy to measure
  2. Economic risk may be caused by international trade
  3. Economic risk is something which cannot be avoided
  4. Economic risk is influenced by many factors

Answer(s): B,D






Post your Comments and Discuss CIMA CIMAPRO19-P03-1 exam with other Community members:

CIMAPRO19-P03-1 Discussions & Posts