What should the dollar-pound spot exchange rate

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Problem: ?Two countries, Great Britain and the United States, produce just one good: beef. Suppose the price of beef in the United States is $2.80 per dollar and in Britain it is 3.70 per pound.

a. According to PPP theory, what should the dollar/pound spot exchange rate be?

b. Suppose the price of beef is expected to rise to $3.10 in the United States and to 4.65 pound in Britain. What should the one-year forward dollar/pound exchange rate be?

Reference no: EM132761942

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