Currently, You Can Exchange $1 for SF1

question 10

Multiple Choice

Currently, you can exchange $1 for SF1.14.Assume the average inflation rate in the U.S.over the next two years will be 2.5 percent annually as compared to 3 percent in Switzerland.Based on this information and relative purchasing power parity, which of the following assumptions can you make regarding the next two years?

• A)The Swiss franc will appreciate against all currencies.
• B)The Swiss franc will appreciate against the U.S.dollar.
• C)The U.S.dollar will appreciate against all currencies.
• D)The U.S.dollar will appreciate against the Swiss franc.
• E)Both the U.S.dollar and the Swiss franc will appreciate against all other currencies.

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Definitions:

Direct Materials Purchases

The total amount of raw materials bought by a company for use in production during a specific accounting period.

Material B

A generic term often used to denote a specific type of material used in the manufacturing or production process.

Budgeted Total Sales

The estimated total revenue that a business plans to generate from goods or services sold within a specific period.

Sales Estimates

Projections or predictions about the amount of revenue that will be generated through sales activities within a certain period.