The current spot rate between the U.K. and the U.S. is £0.6764 per $1. The expected inflation rate in the U.S. is 1.8 percent. The expected inflation rate in the U.K. is 3.4 percent. If relative purchasing power parity exists, what will the exchange rate be 2 years from now?
A) £0.6549/$1
B) £.0.6656/$1
C) £.0.6872/$1
D) £0.6982/$1
E) £.5331/$1
Correct Answer:
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