In the Spot Market,$1 Is Currently Equal to £0

question 55

Multiple Choice

In the spot market,$1 is currently equal to £0.6211.Assume the expected inflation rate in the U.K.is 2.6 percent while it is 4.3 percent in the U.S.What is the expected exchange rate four years from now if relative purchasing power parity exists?

• A)£0.5799
• B)£0.5822
• C)£0.6105
• D)£0.6623
• E)£0.6644

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