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Suppose you plan to vacation in Toronto (Canada) one year from now. The cost of a hotel room currently is CAD100 per night. However, room
Suppose you plan to vacation in Toronto (Canada) one year from now. The cost of a hotel room currently is CAD100 per night. However, room rates will change with Canadian inflation over the next year. Inflation is expected to be 3% in Canada and 2% in the U.S. during the next one year. The current spot exchange rate is CAD 1.1145/USD and future changes in the exchange rate will evolve according to PPP. The U.S. dollar-cost of a hotel room in Toronto next year is expected to be USD night. [Show working as best you can). per
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