What is the expected German inflation rate if 3% inflation is expected in the United States, the spot exchange rate is €1.5/$ and the expected spot rate is €1.6/$?
A) 2.81%
B) 7.10%
C) 9.87%
D)11.43%

Name: What is the expected German inflation rate if 3% inflation is expected in the United States, the spot exchange rate is €1.5/$ and the expected spot rate is €1.6/$? A) 2.81% B) 7.10% C) 9.87% D)11.43%
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Quizplus · Accepted Answer

(1 + i_G/1.03) = 1.6/1.5; i_G = 0.0987, or 9.87%

What Is the Expected German Inflation Rate If 3% Inflation