ACCA F9 Lecture Notes – Forecasting foreign currency exchange rates
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good Morning Sir,
Related to the example 1 of this area. The exchange rate mentioned is $/拢 1.70
Now i get this that our base currency is Sterling, as if i am not wrong the base currency is one for which the spot rate is quoted. So by going that 1.70 x 1.05/1.02= 1.75
It means the spot rate after 1 year will be $/拢 1.75. Right?
It shows that the pound has depreciated. What I don’t get is by the rule of PPPT the country with the higher inflation rate should be depreciated. But here pound has depreciated and in relation to that dollar must be appreciated.
Please guide me on this. Thanx
The spot rate does indeed change to $/GBP 1.75, which means that the pound has appreciated, not depreciated (1 GBP now buys 1.75 dollars, before it only bought 1.70 dollars).
I do suggest that you watch the free lectures that go with the lecture notes because it is in the lectures that I explain and expand on the notes. The notes are only lecture notes and are not enough by themselves. If you are not watching the lectures for any reason then you must buy a Study Text from one of the ACCA approved publishers.
Thank you very much John for your kind help and suggestion. I will watch the lectures for further clarification.
You are welcome 馃檪
Where do we get the answers for the illustrations.
All the examples are worked through in the lectures.
Also, if you look at the contents page of the lecture notes, all the answers are printed in the notes!