In the spot market,$1 is currently equal to A$1.42. The expected inflation rate is 3 percent in Australia and 2 percent in the U.S.. What is the expected exchange rate one year from now if relative purchasing power parity exists?
A) A$1.4058
B) A$1.4062
C) A$1.4286
D) A$1.4342
E) A$1.4484
Correct Answer:
Verified
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