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The spot exchange rate between the dollar and the euro is 1.18 dollars per euro (USD/EUR). The expected inflation rates are: 2% in year 1
The spot exchange rate between the dollar and the euro is 1.18 dollars per euro (USD/EUR). The expected inflation rates are:
- 2% in year 1 and 3% in year 2 in the US; and
- 1% in year 1 and 1.5% in year 2 in the euro-area.
What would be the forecast of the exchange rate USD/EUR in two years based on PPP?
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Investments An Introduction
Authors: Herbert B. Mayo
13th Edition
0357127951, 978-0357127957
