Q24-1

Question 24 7 pts Suppose the spot rate is A$1.77/GBP. An Audi can be purchased in Sydney, Australia, for A$30,000 or in London, United Kingdom, for 17,860. The real interest rate is 3.5% p.a. for AUD and 1.5% for GBP a) Calculate the real exchange rate of Sydney Audi per London Audi. Is the real exchange rate consistent with the prediction of the absolute PPP? Explain