N4

5.2. If PPP held several years ago when e was 1.5 , and since then US prices have increased by 80% since and foreign prices have increased by 20%, what is eppp now? What is the current e if PPP asserts that the $ is overvalued by 5%? 5.3. Concisely state in just a few words what you would assign a very high probability of having occurred if you were told that estimates of eppp had increased dramatically (e.g., doubled) over the past year. (12 words MAX)