Japan 85.45. 1yr Infl=1.2% Uk. 0.62. Infl=1.6 US. Infl=1.3 According to relative purchase parity, which of the below is accurate? 1) Japan’s will depreciate 2) uk’s will be about the same

perhaps if you better worded your problem and put the details in a more understandable form, then maybe someone can address your concerns. and what is ‘uk’s will be about the same’ ? CFAI or any study guide will never use ‘will be about the same’ to describe something…it’s either the same or not the same.

If Japan has higher inflation rate than US, then Japanese yen should depreciate.

Post the question #, you might get better feedback

Gud luk

Thanks Alan. the question is from one of the samples’

Japan yen/$ 85.45. 1yr Infl=1.2%

Uk.£/$ 0.62. Infl=1.6 US. Infl=1.3 According to relative purchase price parity, which of the below is accurate? 1) Japan’s will depreciate 2) uk’s will be about the same

Thanks Alan. the question is from one of the samples’

Japan yen/$ 85.45. 1yr Infl=1.2%

Uk.£/$ 0.62. Infl=1.6 US. Infl=1.3 According to relative purchase price parity, which of the below is accurate? 1) Japan’s will depreciate 2) uk’s will be about the same

I do vaguely recall seeing “about the same” in the CFA sample. It pertains to the question by OP.

Thanks preppie … This is from one of the samples.Qn# 45.the answer is 2)… I gues there is sthg wrong with the question.

Got you.

- Japanese yen should apprieciate, so, the first answer is out.

And if I remember correctly, the third answer is also offbase. So, that leaves UK’s being about the same a better choice than the other two.

Right. I somehow thought Jyen depreciates as it becomes 85.03x …however this means jy appreciates…thanks

I thought that one was weird too. They had a fixed income question on the exam that I believe was screwed up. They gave a weighted average maturity of 243 months which implies seasoning of 117 months but in the question they said it implied seasoning of just 17 months. I figured…OK, typo. Then the sample answer used 17 months in it as well. My default assumptionw as that the typo was on the months, but I suppose it could have been on the WAM as well. Either way…very frustrating.

I am with you on this

Yen expected rate: 85.45 * 1.012 / 1.013 = 85.37 => US$ depreciate, Yen appreciate so answer (1) is wrong UK expected rate: 0.62 * 1.016 / 1.013 = 0.6218 => about the same as 0.62 thus (2) is correct. I know the question is not set in the best manner but out of the 3 questions, (2) is most likely correct since the other two is obviously wrong.