Why might an identical good not be priced the same in two markets (accounting for spot exchange rates)? Suppose the current spot rate is $1.55/ on the first of January. By year-end, the U.S. CPI is expected to climb from 144 to 150 and the UK. CPI from 120 to 130. According to PPP, what is the expected spot rate on December 31? Why might the real interest earned from holding one currency differ from another? Why would one expect currencies with high interest rates to depreciate? #102 Does the interest rate differential between two countries historically predict the change in the spot rate? #102