登录之后可查看解析

This answer takes into account only the increase in the price level. The depreciation of the pound must also be taken into consideration.
This answer takes into account only the depreciation of the pound. The increase in the price level must also be taken into consideration.
This is not the correct answer. Please see the correct answer for a full explanation. We have been unable to determine how to calculate this incorrect answer choice. If you have calculated it, please let us know how you did it so we can create a full explanation of why this answer choice is incorrect. Please send us an email at support@hockinternational.com. Include the full Question ID number and the actual incorrect answer choice -- not its letter, because that can change with every study session created. The Question ID number appears in the upper right corner of the ExamSuccess screen. Thank you in advance for helping us to make your HOCK study materials better.
In order to determine the price to quote, Caroline needs to take into account the price level increase in the U.S. and also the depreciation of the pound. Both of these will increase the number of pounds that need to be quoted in the price. The price to be quoted is calculated as follows: ￡700 × <(1 + .03) × [1 / (1 ? .05)]> or ￡700 × (1.03 / .95) = ￡759. To look at this another way: Let's assume that today, the exchange rate between the British pound and the U.S. dollar is ￡1 = $1.6094 US. So ￡700 today would be equal to $1,126.58 US (700 × 1.6094). Inflation in the U.S. is expected to be 3%. Therefore, $1,126.58 today = $1,160.38 one year from now ($1,126.58 × 1.03). The British pound is expected to depreciate 5% this year with respect to the U.S. dollar. That means the British pound will buy 5% less in U.S. dollars one year from now. If ￡1 today buys $1.6094 US, 5% less than that is $1.52893 ($1.6094 × .95). The amount of British pounds the company needs to receive one year from today in order to be able to convert it into $1,160.38 US at the exchange rate of ￡1 = $1.52893 US is ￡758.95 ($1,160.38 / $1.52893).