In the spot market, $1 is currently equal to A$1.2389. The expected inflation rate in Australia is 5 percent and in the U.S. 3.5 percent. What is the expected exchange rate one year from now if
Relative purchasing power parity exists?
A) A$1.2203
B) A$1.2246
C) A$1.2539
D) A$1.2575
E) A$1.2648
Correct Answer:
Verified
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