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Japan is expected to have inflation of 2% for the coming year, while the U.S. is expected to have deflation of 3%. The spot exchange

Japan is expected to have inflation of 2% for the coming year, while the U.S. is expected to have deflation of 3%. The spot exchange rate is yen 95/$. A Toyota made in Japan costs yen 4.75 million. Purchasing power parity holds.

a. What is the best estimate of the spot rate 1-year from today? Explain your answer.

b. What will be the dollar cost of a car imported from Japan one year from today?

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