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Assume the following information is available for Us and Europe US Europe Nominal interest rate 4% 6% expected inflation 2% 5% spot rate $1.13 one

Assume the following information is available for Us and Europe

US Europe

Nominal interest rate 4% 6%

expected inflation 2% 5%

spot rate $1.13

one yr forward rate $1.10

Required

b) According to PPP what is the expected spot rate of euros in one yrs time

c)According to IFE what is the expected spot rate of euros in one years time

d)Reconcile your answer in parts b & c

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