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Problem 1: If the current spot exchange rate is $0,9744 Canadian buys $1 U.S. and inflation is expected to be 1 percent over the next year in the U.S. with the Canadian inflation rate expected to be 5 percent over the same period. What would the exchange rate be at the end of the year using relative form of the PPP equations.
A. $1.0234 CandianB. $0.9922 CanadianC. $0.9844 CanadianD. $0.9354 Canadian
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