Assume the Current Spot Rate Between the UK and the U.S.is

question 1

Multiple Choice

Assume the current spot rate between the UK and the U.S.is £0.6058 per $1, the expected inflation rate in the U.S.is 2.2 percent, and the expected inflation rate in the UK is 3 percent.If relative purchasing power parity exists, what will the exchange rate be next year?

• A)£.6389/$1
• B)£.6106/$1
• C)£.6223/$1
• D)£.6022/$1
• E)£.6336/$1

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Definitions:

Flexible Budget

A budget that adjusts or flexes with changes in volume or activity levels of the organization.

Variable Cost

Expenses that vary directly with levels of output or production volume.

Spending Variance

The difference between the actual amount spent and the budgeted amount in financial management, often analyzed in cost accounting.

Employee Salaries

The regular compensation paid to employees for their labor or services, typically expressed as an annual amount or hourly wage.