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Suppose that the spot exchange rate between the German Mark (DM) and the U.K. Pound () was DM5/1 = 0.2/DM1 in 2005.Between 2005 and 2010,

Suppose that the spot exchange rate between the German Mark (DM) and the U.K. Pound () was DM5/1 = 0.2/DM1 in 2005.Between 2005 and 2010, the consumer price index rose 10% in Germany, and 32% in the U.K.Then, what will be the spot exchange rate in 2010predicted by the Purchasing Power Parity Hypothesis?

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