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Assumptions London New York per ) Spot exchange rate ($ One-year Treasury bill rate (respective countries) Expected inflation rate 1.2914 0.100% Unknown 1.2914 1.090% 2.400%

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Assumptions London New York per ) Spot exchange rate ($ One-year Treasury bill rate (respective countries) Expected inflation rate 1.2914 0.100% Unknown 1.2914 1.090% 2.400% a. What do the financial markets suggest for inflation in U.K. next year? b. Estimate today's one-year forward exchange rate between the dollar and the pound.(

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