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Assume the Average Annual CPI Values for 2012 and 2013

question 241

Multiple Choice

Assume the average annual CPI values for 2012 and 2013 were 207.3 and 215.3,respectively.What was the percent increase in the CPI between these two years?


Definitions:

Covered Interest Arbitrage

A strategy that involves converting currency through the spot exchange market, investing in foreign interest bearing securities, and hedging exchange risk through the forward market to earn riskless profit.

Forward Rate

The predicted interest rate for a loan or investment for a specific period in the future, differing from current rates.

Nominal Risk-Free Rate

The rate of return on an investment with no risk of financial loss, not taking into account inflation.

Purchasing Power Parity

An economic theory that suggests exchange rates between currencies are in equilibrium when their purchasing power is the same in each of the two countries.

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