# PPP You believe that the future value of the Australian dollar will be determined by purchasing power parity. You expect that inflation in Australia will be 6 percent next year, whereas inflation in the United States will be 2 percent next year. Today the spot rate of the Australian dollar is \$0.81\$ and the one-year forward rate is \$0.77. What is the expected spot rate of the Australian dollar in one year?

FindFind

### International Financial Management

14th Edition
Publisher: Cengage
ISBN: 9780357130698
FindFind

### International Financial Management

14th Edition
Publisher: Cengage
ISBN: 9780357130698

#### Solutions

Chapter 8, Problem 45QA
Textbook Problem

## PPP You believe that the future value of the Australian dollar will be determined by purchasing power parity. You expect that inflation in Australia will be 6 percent next year, whereas inflation in the United States will be 2 percent next year. Today the spot rate of the Australian dollar is \$0.81\$ and the one-year forward rate is \$0.77. What is the expected spot rate of the Australian dollar in one year?

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