A basket of goods in the U.S. costs $200 and in Germany a basket of German goods costs 200 euro. In the US, expected inflation is 1% and in Germany, expected inflation is 2%. The exchange rate is currently 1.2 $/euro. The real exchange rate is

-1.2 U.S. goods/German goods

-0.8333 U.S. goods/German goods

-1.212 U.S. goods/German goods

-overvalued according to the law of one price