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Assume that the export price of a Nissan XTerra from Osaka, Japan is 2,800,000. The exchange rate is 110.20/US$. The forecast rate of inflation in

Assume that the export price of a Nissan XTerra from Osaka, Japan is 2,800,000. The exchange rate is 110.20/US$. The forecast rate of inflation in the United States is 2.0% per year and is 0.0% per year in Japan.

a) What is the export price of the XTerra at the beginning of the year, expressed in USD?

b) Assuming that PPP holds, what should the exchange rate be at the end of the year? What is the export price of the Xterra at the end of the year, expressed in USD?

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