Question
1. Annual inflation rates in the U.S. and Chile (currency code CLP) are expected to be 4% and 6% respectively. If the current exchange rate
1. Annual inflation rates in the U.S. and Chile (currency code CLP) are expected to be 4% and 6% respectively. If the current exchange rate is $0.1250/CLP, then what is the expected spot rate in two years? Use the exact and approximation form of PPP.
2. Suppose the dollar/rupiah rate is fixed but Indonesian prices are rising faster than U.S. prices. Is the Indonesian rupiah appreciating or depreciating in real terms? HINT: This is challenging. Use the formula and plug in some sample numbers, keeping the nominal rate fixed.
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Corporate Financial Management
Authors: Glen Arnold
5th edition
978-1292178066, 129217806X, 273758837, 978-0273758839
