Xinyu travels often. She wants to buy a new iPhone. She will visit Sydney and New York on her next trip. Xinyu is a finance major and wants to use purchasing power parity (PPP) to determine if she is paying the same price in Sydney and New York.

a. If the price of the iPhone is USD$1000 in New York and the price of the same iPhone in Sydney is AUD$1350, using purchasing power parity, is the price of the iPhone truly equal if the spot rate is AUD$1.2288/USD$?

b. If the price of the iPhone remains the same in New York one year from now, what price should the iPhone be in Sydney in one-year if PPP holds true. The US Inflation rate is 1.46% and the Australian inflation rate is 2.55%.