Current Exchange Rates: $1.6 = 1 British Pound and 1.5 Swiss Francs = $1 Current one-year Inflation Rates: 1% in Switzerland, 4% in Britain, and 2% in the US 11.

What should the cross rate be between Francs and Pounds?

a) .42 Pounds per SF

b) .64 SF per Pound

c) 1.56 SF per Pound

d) 2.4 Pounds per SF

If purchasing power parity holds true, what is the expected exchange rate one year from now?

a) .613 Dollars per Pound

b) .637 Pounds per Dollar

c) 1.57 Pounds per Dollar

d) 1.63 Dollars per Pound