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  • 09-02-2024
  • Business
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Suppose the spot exchange rate is €1.00 = $1.60. Next year's expected inflation rate is 2% in the US and 3% in the euro zone. What is the one-year forward rate that should prevail if relative PPP is holding?
a. €1.00 = $1.5686
b. €1.00 = $1.5845
c. €1.00 = $1.6157
d. €1.00 = $1.6320

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