The current spot rate-expected inflation rate

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Reference no: EM13935149

The current spot rate between the U.K. and the U.S. is £0.5331 per $1. The expected inflation rate in the U.S. is 4.5%. The expected inflation rate in the U.K. is 3.6%. If relative purchasing power parity exists, the exchange rate next year will be: (please explain the calculation.)

a. £1.8927/$1

b. £0.5379/$1

c. £1.8589/$1

d. £0.5192/$1

e. £0.5283/$1

Reference no: EM13935149

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