Assume that the direct quote between the $ and is 1 = $ 1.8 and that the inflation rate in UK is 10% and the inflation rate in the US is 5%

Required: Compute the % change in the direct quote and determine the new exchange rate

(3 marks)

e) Assume that the direct quote is Deuchemark is DM 1 - $ 0.8 while the general interest rate in

US is 10% and general interest rate in Germany is 6%.

Required: Compute the percentage change in direct quote and the new exchange rate.