Use the following information to answer the question. You observe the following current rates and prices...

 

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Use the following information to answer the question. You observe the following current rates and prices today: the spot exchange rate today: E(S/pound)-1.60, AU$1.60 per U.K pound, the expected one-year ahead inflation rate in Australia: pi($) = 2%. the expected one-year ahead inflation rate in the U.K.: pi(pound) = 7%. the price level in Australia today: P(S) - AU$20.00 the price level in the U.K. today: P(pound) - 10.00 pounds Based on the speed of convergence for the deviation from the purchasing power parity, which says the deviation will shrink by 15% per year, what is the expected real exchange rate, q(AU/UK), in 1 year? (rounded to 2 decimal places) Use the following information to answer the question. You observe the following current rates and prices today: the spot exchange rate today: E(S/pound)-1.60, AU$1.60 per U.K pound, the expected one-year ahead inflation rate in Australia: pi($) = 2%. the expected one-year ahead inflation rate in the U.K.: pi(pound) = 7%. the price level in Australia today: P(S) - AU$20.00 the price level in the U.K. today: P(pound) - 10.00 pounds Based on the speed of convergence for the deviation from the purchasing power parity, which says the deviation will shrink by 15% per year, what is the expected real exchange rate, q(AU/UK), in 1 year? (rounded to 2 decimal places)