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Question
Suppose the current spot rate in New York is .0119 dollars per yen. Inflation for the coming year in the United States is expected to be 3%, while inflation for the coming year is Japan is expected to be only 1%. Using the purchasing power parity theory, what is the expected spot rate at the end of the year should beA) .0110147 dollars per yen.
B) .0108159 dollars per yen.
C) .0138373 dollars per yen.
D) .0121356 dollars per yen.
Answer
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