Question: Assume that the direct between the $ and L is L1=$ 1.6 and that the inflation rate in UK is 12% and the inflation rate

Assume that the direct between the $ and L is L1=$ 1.6 and that the inflation rate in UK is 12% and the inflation rate in the US is 8%

Required

  1. Compute the % change in the direct quote and determine the new exchange rate (10 marks)
  2. Discuss in details different types of types of exchange rates risk

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