Suppose the initial exchange rate between the USD and BRL is 5.65 = 1 USD, and that after 5 years the observed nominal exchange rate is S5 is 6.53 = 1 USD. Over the course of the 5 years, US inflation averaged 2% and inflation in Brazil averaged 4.75% per year.

This means that after 5 years, the price level in the US was 110.41 and in Brazil it was 126.12

After 5 years, what was the real BRL/USD exchange rate, q5? _____ BRL = 1 USD

6.33 is not the right answer.