CFA Practice Question

There are 253 practice questions for this study session.

CFA Practice Question

Assume that in 1996 the USD/AUD (Australian Dollar) exchange rate was USD0.72/AUD. The consumer price index in the U.S. rose from 135 to 192 from 1996 to 2012 while the Australian price index rose from 114 to 170 in the same period. If PPP holds, the 2012 USD/AUD exchange rate equals:

A. 0.69.
B. 0.75.
C. 0.79
Correct Answer: A

0.72 x (192/135)/(170/114) = 0.69.

User Contributed Comments 1

User Comment
charomano Higher inflation for AUD, so it must depreciate against the dollar.
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