Question: The current spot rate between the U.K. and the U.S. is 0.5331 per $1. The expected inflation rate in the U.S. is 4.5%. The expected

The current spot rate between the U.K. and the U.S. is 0.5331 per $1. The expected inflation rate in the U.S. is 4.5%. The expected inflation rate in the U.K. is 3.6%. If relative purchasing power parity exists, the exchange rate next year will be: (please explain the calculation.)

a. 1.8927/$1 b. 0.5379/$1 c. 1.8589/$1 d. 0.5192/$1 e. 0.5283/$1

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