BAM Corp, a US firm, expects to receive cash dividends from a Japanese joint venture over the coming three years. BAM's WACC is 8%.

The current spot exchange rate (So) = JPY 108 / USD. Assume the exchange rate will elvolve according to PPP.

The following macroeconomics information is available:

1. Expected inflation in the US in all future periods = 2.25% p.a.

2. Expected inflation in Japan in a future periods = .25% p.a.

The spot rate in years 1, 2, and 3 should be:

a. JPY 110.15, JPY 112.35, JPY 114.59 per USD

b. JPY 105.89, JPY 108.57, JPY 108.81 per USD

c. JPY 110.43, JPY 112.91, JPY 115.46 per USD

d. JPY 105.89, JPY 103.82, JPY 101.79 per USD