The US Inflation Rate Is Expected to Be 4 Percent

question 27

Multiple Choice

The US inflation rate is expected to be 4 percent over the next year, while the European inflation rate is expected to be 3 percent. The current spot rate of the dollar is 0.80 euro. Using purchasing power parity, the expected spot rate at the end of one year is ____ euro to the nearest cent.

• A) 0.81
• B) 0.79
• C) 0.80
• D) None of the above

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Definitions:

Sum-Of-The-Years'-Digits

An accelerated depreciation method that calculates annual depreciation by adding the asset's expected life years, assigning weights to each year, and depreciating more heavily in the earlier years.

Depreciation Estimates

Projections or calculations of the reduction in the value of an asset over time, used for accounting and taxation purposes.

Prospective

Pertains to future events or conditions as they are expected to happen or be considered for planning and decision-making.

Depreciation Parameters

The set of assumptions and methodologies used to calculate the depreciation of an asset over its useful life.