The current spot rate between the pound and the dollar is £.7610/$. The expected inflation rate in the U.S. is 3.11percent and the expected inflation rate in the U.K. is 1.64 percent. Assuming relative purchasing power parity holds, what will the exchange rate be next year?

Answer rating: 100% (QA)

Relative Purchasing Power Parity PPP is a theory suggesting that changes in exchange rates between two currencies are proportional to the changes in price levels in their respective countries The formula for calculating the expected future exchange rate ... View the full answer