In the spot market, $1 is currently equal to A$1.3953. The expected inflation rate is 4 % in Australia and 3 % in Canada. What is the expected exchange rate one year from now if relative purchasing power parity exists?
A) A$1.3813
B) A$1.3872
C) A$1.3953
D) A$1.4093
E) A$1.4372
Correct Answer:
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