You are planning a ski vacation to Mt. Blanc in Chamonix, France, one year from now. You are negotiating over 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 euro 9, 800 (Christmas season) will be adjusted upwards or downwards for any change in the French cost of living between now and then. You are basing your budgeting on purchasing power parity (PPP). French 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 $1.3620/euro. What should you budget as the U.S. dollar cost of the one week rental? The Argentine peso was fixed through a currency board at Ps1.00/$ throughout the 1990s. In January 2002 the Argentine peso was floated and went into a On January 29, 2003 it was trading at Ps3.20/$. During that one year period Argentina's inflation rate 20% on an annualized basis. Inflation in the Unit was States during that same period was 2.2% annualized. a. What should have been the exchange rate in January 2003 if PPP held