In the Spot Market, $1 Is Currently Equal to £

question 226

Multiple Choice

In the spot market, $1 is currently equal to £.5725. The expected inflation rate in the U.K. is 4 percent and in Canada 2 percent. What is the expected exchange rate one year from now if relative
Purchasing power parity exists?

• A) £.56105
• B) £.57216
• C) £.58395
• D) £.59001
• E) £.59540

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Definitions:

Joint Tenants

A form of co-ownership where all owners have equal rights to the whole property, and upon the death of one owner, their interest automatically passes to the surviving owner(s).

Ownership

The legal right to possess, use, and dispose of property or an asset.

Watercourse

A natural or man-made channel through which water flows, such as a river, brook, or canal.

Land Owner

An individual or entity that holds the legal title or interest in a parcel of land.