Dalin's Luggage: Sydney to Denver.Dalin Chen owns homes in Sydney, Australia, and Denver, United States. She travels between the two cities at least twice a year. Because of her frequent trips, she wants to buy some new high-quality luggage. She has done her research and has decided to purchase a Briggs and Riley three-piece luggage set. There are retail stores in Denver and Sydney. Dalin was a finance major and wants to use purchasing power parity to determine if she is paying the same price regardless of where she makes heris purchase.

a. If the price of the three-piece luggage set in Denver is

USD847

and the price of the same three-piece set in Sydney is

AUD929,

using purchasing power parity, is the price of the luggage truly equal if the spot rate is

AUD1.0968

= USD1.00?

b. If the price of the luggage remains the same in Denver one year from now, determine the price of the luggage in Sydney in one year's time if PPP holds true. The U.S. inflation rate is

1.19%

and the Australian inflation rate is

3.16%

A.

Yes, the price of the luggage is truly equal if the spot rate is

A$1.0968/$.

B.

No, the price of the luggage is not equal if the spot rate is

A$1.0968/$.

C.

There is not enough information to determine if the price of the luggage is equal.