a) the expected US minus UK inflation differential for coming year is - 1% = 2% - 3%
b) the current US real exchange rate us/uk with the UK 1.25 = 100/80
c) the dollar overvalued 20% = (1.5/1.25-1)
d) the US real exchange rate with UK will be in one year's time is 1.24
e) the expected rate of real depreciation for US (versus the UK) is 1.1
f) the expected rate of nominal depreciation for the US(versus the UK) is 1.24
g) I predict the dollar price of one pound a year from now will be 1.1
Explanation:
a) The inflation rate differential is the difference between the inflation rate in one country and the inflation rate in another.
b) The real exchange rate can be defined by Purchase Power Parity (PPP)
FX = P 2 / P 1
where: FX = Exchange rate of currency 1 to currency 2
P 1 = Cost of good X in currency 1
P 2 = Cost of good X in currency 2
c) current quoted rate compared to real exchange rate based on PPP is higher, then USD is overvalued
d) Real exchange rate is defined based on PPP in next 1 year. In next 1 year, U.S. basket is $102 = 100 x(1+ inflation rate 2%) while this basket in UK is 82.4 pound = 80 x (1+ inflation rate 3%)
thus expected rate us/uk = 102/82.4 = 1.24
e) The speed of convergence to absolute PPP is 15% per year, then US real exchange rate us/uk with the UK 1.1 = current US real exchange rate us/uk with the UK 1.25 - 15%
f) Nominal depreciation is same as real depreciation in item d
d) I used the calculation with convergence to absolute PPP as item e
The amount of revenue that should be reflected in the fiscal year ended June 30, 2019 is $52,235.29.
Explanation:
Number of days from June 7 to June 30 = 30 - 6 = 24 days
Number of days from July 1 to July 27 = 27 days
Total number of days for the summer session = Number of days from June 7 to June 30 + Number of days from July 1 to July 27 = 24 + 27 = 51
Total tuition paid for the summer session = $111,000
Amount to be reflected in the fiscal year ended June 30 = (Number of days from June 7 to June 30 / Total number of days for the summer session) * Total tuition paid for the summer session = (24 / 51) * $111,000 = $52,235.29
Therefore, the amount of revenue that should be reflected in the fiscal year ended June 30, 2019 is $52,235.29.