Question
You are currently doing your Master degree at Michigan University U.S.A. You are planning a ski vacation to Cardrona Alpine Resort, New Zealand one year
You are currently doing your Master degree at Michigan University U.S.A. You are planning a ski vacation to Cardrona Alpine Resort, New Zealand one year from now. You are negotiating the rental of a chateau. The chateau's owner wishes to preserve his real income against both inflation and exchange rate changes, and so the present weekly rent of NZD9,800 (Winter season) will be adjusted upward or downward for any change in the New Zealand cost of living between now and then. You are basing your budgeting on purchasing power parity (PPP). New Zealand inflation is expected to average 3.5% for the coming year, while U.S. dollar inflation is expected to be 2.5%. The current spot rate is $1.3620/NZD. What should you budget as the U.S. dollar cost of the one week rental?
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