If the USInflation Rate Is 3 Percent Annually and the Swiss Inflation

question 80

Multiple Choice

If the U.S.inflation rate is 3 percent annually and the Swiss inflation rate is 5 percent annually,by what percent would the dollar price of francs need to change according to purchasing power parity?

• A) Depreciate by 5 percent
• B) Appreciate by 3 percent
• C) Appreciate by 5 percent
• D) Depreciate by 2 percent
• E) Appreciate by 2 percent.

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Definitions:

Annuitant

The individual entitled to receive payments from an annuity contract, usually during retirement.

Annually Compounded

A compound interest calculation where the interest is added to the principal at the end of each year.

Nominal Rate

The stated interest rate of a bond or loan, without accounting for compounding or inflation.

Mortgage Loan

A loan secured by real property through the use of a mortgage note which evidences the existence of the loan and the encumbrance of that realty.