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On August 1st 2009 USD/SAR exchange rate was SAR9.20 per USD. On August 1st 2010 (1 year later), USD/SAR rate moved up to USD/SAR9.80. During this period, one year nominal risk free interest rate in the US was 3.5% per annum (per year). Real interest rate in the US was 1.5%. On August 1st , 2010, economists shared the consensus view that USD/SAR rate was at Purchasing Power Parity equilibrium. Provided that IFE holds, what would be the best forecast of South African inflation between August 2009 and 2010.

A. 8.62
B. 2.90
C. 8.06
D. 10.25

Reference no: EM13116342

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