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4. Suppose that the current exchange rate is 1 euro = $1.23 and a product costs $200 in the US market. This year, the US

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4. Suppose that the current exchange rate is 1 euro = $1.23 and a product costs $200 in the US market. This year, the US market's inflation rate is 4% and the European market's inflation rate is 9%. a) Assuming that the exchange rate changes to 1 euro = $1.20, show how to make a locational arbitrage. b) Based on the PPP. find the exchange rate that eliminates the locational arbitrage opportunity

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