CFA Practice Question

CFA Practice Question

The price index at the beginning of years 20X1, 20X2, 20X3 is 100, 125, 137.5. Suppose inflation at the beginning of year 20X1 was expected to be 12%. Then the amount of 'unanticipated inflation' for year 20X1 will be:
A. -3%
B. 13%
C. 100%
Explanation: Inflation during 20X1 = (125/100) - 1 = 25%. Hence unanticipated inflation = 25% - 12% = 13%

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