Question: Given that US inflation for years one and two ate 2.5% and 4% respectfully while inflation in India over the same period are 7.5% and

  1. Given that US inflation for years one and two ate 2.5% and 4% respectfully while inflation in India over the same period are 7.5% and 11% respectfully. If current exchange rate R/$ = 71.25, obtain the spot exchange rate at the end of the second year if PPP holds exactly.

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