Assume the spot exchange rate is AUD.7064. The expected inflation rate is 1.9 percent in Australia and 1.6 percent in th...
Assume the spot exchange rate is AUD.7064. The expected inflation rate is 1.9 percent in Australia and 1.6 percent in the U.S. What is the expected exchange rate one year from now if relative purchasing power parity exists?
|
AUD.7063 |
||
|
AUD.7085 |
||
|
AUD.7110 |
||
|
AUD.7074 |
||
|
AUD.7092 |
Homework Answers
Future rate =Spot Rate*(1+Inflation in Australia)/(1+Interest
rate) =0.7064*(1+1.9%)/(1+1.6%) =0.7085
Option b is correct option
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