1. Assume that locational arbitrage ensures that spot exchange rates are properly aligned. Also, assume that you believe in the Purchasing Power Parity (PPP). The spot rate of the Singapore dollar(S$) against the Australian dollar(A$) and Malaysian ringgit (MYR) is 0.9024 (A$/S$) and 2.3498 (MYR/S$), respectively. You expect that the one-year inflation rate is 6.20% in Singapore, 4.48% in Malaysia and 2.55% in Australia. The one-year interest rate is 9.21% in Singapore, 7.96% in Malaysia and 5.67% in Australia. What is your expected spot rate of the Australian dollar in one year with respect to the Malaysian ringgit (MYR/A$)? (enter 4 decimal places number with no sign or symbol)

The correct answer is: 2.6530