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Economists estimate the annual inflation rates to be 2% in the US and 3% in Europe. Consider the EURUSD exchange rate. Using R-PPP, calculate
Economists estimate the annual inflation rates to be 2% in the US and 3% in Europe. Consider the EURUSD exchange rate. Using R-PPP, calculate the relative change in the dollar price of the euro (appreciation/depreciation rate) annually using the exact relationship. Using R-PPP, calculate the relative change in the dollar price of the euro (appreciation/depreciation rate) annually using the approximate relationship. b) c) Assuming that the EUR is currently traded at a level of EURUSD=1.35, what is the forecasted value of EURUSD in 2 years based on R-PPP? (Use exact relationship).
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Introduction to Finance Markets Investments and Financial Management
Authors: Melicher Ronald, Norton Edgar
15th edition
9781118800720, 1118492676, 1118800729, 978-1118492673
