1. Over a year the consumer price index changed from 200 to 204 in the US. For the same period the Canadian inflation rate was 5%. The exchange rate was USD 0.95 per CAD at the beginning of the year. What should be the exchange rate at the end of the year if relative PPP were to hold? Round the answer to two decimal places and report it without any currency symbols.

2. If the expected inflation rates for the next year are 0.5% in UK and 2.5% in the U. S. and the PPP based exchange rate is $1.20 per pound, what is the expected PPP based exchange rate for the next year? Compute answer tp two decimal places and report without any currency symbols.