I am trying to understand the rationale for the answer in the ACCA FM Specimen Exam. Per the free lecture notes/lecture, we should be calculating the future exchange rate to be S1 = S0(1+Hc)/(1+Hb) (Using inflation figures) OR S1 = S0(1+Ic)/(1+Ib) (Using interest rate figures)
Q1 Specimen exam has both inflation & interest figures, both of which provide different answers. Which figures should be used?