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Suppose that inflation is expected to be about 3% in the U.S. and 1.2% in...

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Finance

Suppose that inflation is expected to be about 3% in the U.S. and 1.2% in the UK (currency code GBP) and the current exchange rate is 0.77 GBP = 1 US dollar.

Round to four decimal places in your calculations. Round to two decimal places in your final answers.

Question 3: The exchange rate in one year is predicted to be approximately:

___________ GBP = 1 USD

Question 4: Suppose the expected inflation levels are the average annual inflation rates expected for the next three years. What is the exact exchange rate predicted by PPP? (Use the exact form).

___________ GBP = 1 USD

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