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Part II: Assume that the current spot rate between US Dollar and Canadian dollar is CAD 1/USD and that the expected exchange rate after one

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Part II: Assume that the current spot rate between US Dollar and Canadian dollar is CAD 1/USD and that the expected exchange rate after one year is CAD 1.2/USD. Also, assume that the inflation rate in Canada is 4 times the inflation rate in the United States. 1. What is the inflation rate in the United States if the relative purchasing power parity holds true? * a. 7.14% b. 9.85% C. 8.57% d. 9.14% e. None of the above

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