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Suppose that S = $1.1045/€. The annualized inflation rates are 4% and 2.75% in the U.S...

Suppose that S = $1.1045/€. The annualized inflation rates are 4% and 2.75% in the U.S and Germany, respectively. Find the exact spot rate in one year. Do not write any symbol. Make sure to round your answers to the nearest 10000th decimal points.

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Answer #1

SPOT RATE IN ONE YEAR = SPOT RATE X (1+ US INFLATION RATE)/(1+ GERMANY INFLATION RATE)

SPOT RATE IN ONE YEAR = 1.1045 X (1+0.04)/(1+0.0275) = 1.1179

Answer : 1.1179 (Thumbs up please)

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