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Suppose the spot exchange rate is $1.25 = 1.00. If the inflation rate in the U.S. is expected to be 3% in the next year
Suppose the spot exchange rate is $1.25 = 1.00. If the inflation rate in the U.S. is expected to be 3% in the next year and 5% in the euro zone, then the expected exchange rate in one year should be based on relative PPP. O 1.2743/$ O $1.2743/ 1.2262/$ O $1.2262/ Given the real interest rate is 4%, expected inflation rate is 2%, what is the nominal rate based on the fisher effect? 6.08% O 2.00% 1.96% 7.21%
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