• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
Free ACCA & CIMA online courses from OpenTuition

Free ACCA & CIMA online courses from OpenTuition

Free Notes, Lectures, Tests and Forums for ACCA and CIMA exams

  • ACCA
  • CIMA
  • FIA
  • OBU
  • Books
  • Forums
  • Search
  • Register
  • Login
  • ACCA Forums
  • Ask ACCA Tutor
  • CIMA Forums
  • Ask CIMA Tutor
  • FIA
  • OBU
  • Buy/Sell Books
  • All Forums
  • Latest Topics

Congratulations to Jamil from Pakistan and Jeeva from Malaysia - Global Prize winners!
see all ACCA December 2022 Genius Hunt Competition winners >>

Specially for OpenTuition students: 20% off BPP Books for ACCA & CIMA exams – Get your BPP Discount Code >>

fisher effect

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FM Exams › fisher effect

  • This topic has 1 reply, 2 voices, and was last updated 1 year ago by John Moffat.
Viewing 2 posts - 1 through 2 (of 2 total)
  • Author
    Posts
  • April 15, 2021 at 1:42 am #617679
    Syed Ahsan Ali
    Member
    • Topics: 111
    • Replies: 69
    • ☆☆

    Handria is a country that has pero for its currency & Wengry is a country that has dollar for its currency.

    The current spot rate exchange rate is 1.5134 peso = $1

    Using interest-rate differentials, the one year forward exchange rate is 1.5346 peso = $1

    The currency market between peso & the dollar is assumed perfect & international fisher effect holds.

    Which of the following is true?

    a) Wengry has a higher forecast rate of inflation than Handria

    b) Handria has a higher nominal rate of interest than Wengry

    c) Handria has a higher real rate of interest than Wengry

    d) The forecast future spot rate of exchange will differ from forward exchange rate

    I don’t know how to answer this question sir. I have cancel the two options C & D since they are not true BUT confused with the options given such as A & B. Can you pls clear this problem to me?

    April 15, 2021 at 9:54 am #617711
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 51543
    • ☆☆☆☆☆

    Using the IRP formula, for the forward rate to be higher, the actual/nominal interest rate in Handria (the peso country) will be higher than that for Wengry (the $ country). Therefore B is correct.

    In theory, interest rates go up and down with inflation rates, and therefore if the interest rate in Handria is higher, then so too the inflation rate should also be higher. Therefore A is not correct.

  • Author
    Posts
Viewing 2 posts - 1 through 2 (of 2 total)
  • You must be logged in to reply to this topic.
Log In

Primary Sidebar

ACCA News:

 

ACCA My Exam Performance for non-variant Applied Skills exams is available NOW

NEW! Download the ACCA Pass Guide

FREE Verifiable CPD for ACCA Members

ACCA mock exams and debrief videos

ACCA Options:  “Read the Mind of the Marker” articles

Subscribe to ACCA’s Student Accountant Direct

Donate

If you have benefited from OpenTuition please donate.

ACCA CBE 2023 Exams

Instant Poll * How was your exam, and what was the result?

BT CBE exam was.. | MA CBE exam was..
FA CBE exam was.. | LW CBE exam was..

Specially for OpenTuition students

20% off BPP Books

Get BPP Discount Code

Latest comments

  • shazleen on ACCA AB Chapter 10 – Management – Questions
  • John Moffat on Introduction to Financial Accounting – ACCA Financial Accounting (FA) lectures
  • John Moffat on Linear Programming – Maximum contribution – ACCA Performance Management (PM)
  • d.kabulova on Introduction to Financial Accounting – ACCA Financial Accounting (FA) lectures
  • alin.sivi on Linear Programming – Maximum contribution – ACCA Performance Management (PM)

Copyright © 2023 · Support · Contact · Advertising · OpenLicense · About · Sitemap · Comments · Log in


We use cookies to show you relevant advertising, find out more: Privacy Policy · Cookie Policy