In the spot market, $1 is currently equal to A$1.12. The expected inflation rate is 3 % in Australia and 2 % in Canada. What is the expected exchange rate one year from now if relative purchasing power parity exists?
A) A$1.1058
B) A$1.1062
C) A$1.1286
D) A$1.1312
E) A$1.1484
Correct Answer:
Verified
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