Question: state the formula. That is the statement with the variables included. 2. Substitute into the formula. Convert the variables to constants/numbers. 3. Solve the problem.

state the formula. That is the statement with the variables included.

2. Substitute into the formula. Convert the variables to constants/numbers.

3. Solve the problem.

1)If the inflation rates in the British pound and the US $ are 4% and 11% respectively, while the exchange rate is 1 pound exchanges for $1.25, what will the future spot rate be?

2) What is the meaning of the above in the context of PPP?

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