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Hello sir.
I need ur help sir.
Tomorrow i have a numerical reasoning test in KPMG. And except all things Im aware of there is one little thing. Inflation questions.
It says that Applicants need to be aware of Inflation, Rebasing and “real prices”.
Please help me to recap from F9:
1)All we know about inflation is : Fisher Formula that connects interest rates and inflation. 1 + i=(1+h)x(1+r) where i=interest in nominal terms, r=interest in real terms right?
2)PPP (purchasing power parity) – forward exchange rates,and IRP (Interest Rates Parity) – future exchange rates
3) There are connections between inflation and INTEREST and EXCHANGE rates.
But if there is no Spot rate? how can we show the changes in levels of inflation? If there are any formulas except Fisher and PPP/IRP ??
4)Whats is rebasing?
Thanks a lot sir. Really appreciate it!!
By the way I passed F9 with 70%!! GOD BLESS YOU John Moffat!
The formulae you have written are all we have.
PPP and IRP are only relevant in situations when we know the current spot rate.
Real prices and the prices when inflation has been removed.
Rebasing is not a term used in F9 – the general meaning is the moving of part of the business to a different place (i.e. different base), which has nothing to do with inflation 🙂
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