In 2020, inflation rate in UK is 3.3% and in Spain it is 3.5%. In 2021, inflation rate in UK is 6% and in Spain it is 5.4%. In 2020 1.07EURO / GBP. Assume UK is home country. What is the expected exchange rate in 2022 (2 years later)? Select one: a. 0.931 b. 1.064 c. 1.066 d. 1.072

In 2020, inflation rate in UK is 3.3% and in Spain it is 3.5%. In 2021, inflation rate in UK is 6% and in Spain it is 5.4%. In 2020 1.07EURO / GBP. Assume UK is home country. What is the expected exchange rate in 2022 (2 years later)? Select one: a. 0.931 b. 1.064 c. 1.066 d. 1.072

International Financial Management

14th Edition

ISBN:9780357130698

Author:Madura

Publisher:Madura

Chapter21: International Cash Management

Section: Chapter Questions

Problem 3ST

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Concept explainers

Currency Market

The currency market, also known as the foreign exchange market, consists of currencies worldwide. This market determines the rate of all currencies based on the buying and selling of forex. It is an over-the-counter market. It is the largest and most liquid market based on trade volume.

Question

In 2020, inflation rate in UK is 3.3% and in Spain it is 3.5%.
In 2021, inflation rate in UK is 6% and in Spain it is 5.4%.

In 2020 1.07EURO / GBP. Assume UK is home country.
What is the expected exchange rate in 2022 (2 years later)?

Select one:

a. 0.931

b. 1.064

c. 1.066

d. 1.072

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