CIMA Exam CIMAPRA19-F03-1 Topic 4 Question 85 Discussion

Actual exam question for CIMA's CIMAPRA19-F03-1 exam

Question #: 85
Topic #: 4

[All CIMAPRA19-F03-1 Questions]

Which of the following best explains why the interest rate parity model is highly effective in practice?

AGovernments actively manage their exchange rates so that parity holds

BDivergence from parity is impossible because exchange rates drive interest rates

CAny divergence from parity can be observed by the market and corrected by arbitrage

DSpeculative forces drive the interest rates and exchange rates together to achieve parity.

Show Suggested Answer

Suggested Answer: A, B, E

by Raylene at May 01, 2024, 10:24 AM

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9 months ago

B is definitely right. It involves WACC and adjusting for debt.

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9 months ago

I went for A, D, and E. D seemed right with cash flow to equity.

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9 months ago

I chose A, B, and C. B seemed correct with WACC calculations.

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10 months ago

I picked A, B, and E. A made sense with the price-earnings ratio.

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11 months ago

Yeah, it was tricky. Which methods did you think were right?

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11 months ago

Hey, did you see that business valuation question in the exam?

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