Suppose the spot exchange rate today is $1.5/. The annual inflation rate is expected to be 3%

Question:

Suppose the spot exchange rate today is $1.5/£. The annual inflation rate is expected to be 3% in the United States and 5% in the United Kingdom over the next three years. The annual real interest rate will be 2% in both economies. Calculate the nominal rates in both countries next year.

Exchange Rate
The value of one currency for the purpose of conversion to another. Exchange Rate means on any day, for purposes of determining the Dollar Equivalent of any currency other than Dollars, the rate at which such currency may be exchanged into Dollars... Nominal Rates
"Nominal interest rate refers to the interest rate before taking inflation into account. Nominal can also refer to the advertised or stated interest rate on a loan, without taking into account any fees or compounding of interest. The nominal...

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