In the spot market, $1 is currently equal to £0.5086. The expected inflation rate in the U.K. is 5 percent and in the U.S. 4 percent. What is the expected exchange rate one year from now if relative
Purchasing power parity exists?
A) £.5035
B) £.5077
C) £.5109
D) £.5121
E) £.5137
Correct Answer:
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