What current spot exchange rate of us dollars for canadian

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Problem 1: One year ago the spot rate of U.S. dollars for Canadian dollars was USD 0.75/CAD1. Since that time United States has recorded an inflation rate of 2%, while in Canada the rate of inflation is 6%. Based on the theory of Relative PPP, the current spot exchange rate of U.S. dollars for Canadian dollars should be approximately ________.

Group of answer choices

Option 1: USD 1.04 / CAD 1

Option 2: USD 0.7217 / CAD1

Option 3: Relative PPP provides no guide for this type of question.

Option 4: USD 0.96 / CAD 1

Reference no: EM132954173

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