What spot exchange should one forecast 5 years into future, Financial Management

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The current spot exchange rate is Dr240/$1.00. Long-run inflation in Greece is calculated at 8 percent yearly and 4.5% in the United States. If PPP is expected to hold among the two countries, what spot exchange should one forecast 5 years into the future?

Solution: Dr240(1 + .08)5/(1 + .045)5 = Dr283/$1.00.

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