Suppose the current spot exchange rate between Japanese yen and US dollars is 115 yen...
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Suppose the current spot exchange rate between Japanese yen and US dollars is 115 yen per dollar. Assume that the annual inflation rate in Japan is 1% per year over the next 15 years and the annual inflation rate in the U.S. is 5% per year over the next 15 years. If purchasing parity holds at all times, what will be the exchange rate 15 years from now?
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