The Current Spot Rate Between the Canadian Dollar and the Euro

question 10

Multiple Choice

The current spot rate between the Canadian dollar and the Euro is C$1.6000/euro.The Canadian and European inflation rates are expected to be 2% and 4% per year for the next 10 years respectively.Using purchasing power parity to predict the exchange rate in 10 years,the predicted exchange rate is:

• A)C$1.3176/euro
• B)C$1.5692/euro
• C)C$1.6000/euro
• D)C$15.6923/euro

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