question 6 of the first item set brazil currency deteriorate 5%, the answer is it is consistent with uncovered IRP, I don’t understand why not choose PPP? given brazil expeced inflation rate is 6.3%, US is 2.3% and one yr free rate, brazil is 8.8%, US is 4.8%
i haven’t done the sample exam but ppp has nothing to do with interest rates, just inflation and prices
the question is brazil currency is 5% lower and asking because of PPP or uncovered IRP? since using either one will show a 4% lower of brazil currency, why choose UIRP, not ppp? florinpop Wrote: ------------------------------------------------------- > i haven’t done the sample exam > but ppp has nothing to do with interest rates, > just inflation and prices