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Problem three Assume the following information is available for the USA and Europe: USA Europe Nominal Interest rate 4% 6% Expected inflation 2% 5% Spot

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Problem three Assume the following information is available for the USA and Europe: USA Europe Nominal Interest rate 4% 6% Expected inflation 2% 5% Spot rate $1.13 a) According to PPP, what is the expected spot rate of the euro in 1 year? b) According to the IFE, what is the expected spot rate of the euro in 1 year

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