What is your expected spot rate of swiss franc in one year

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Arbitrage and PPP. Assume that locational arbi- trage ensures that spot exchange rates are properly aligned. Also assume that you believe in purchasing power parity. The spot rate of the British pound is $1.80. The spot rate of the Swiss franc is £0.30. You expect that the one-year inflation rate will be 7% in the United Kingdom, 5% in Switzerland, and 1% in the United States. The one-year interest rate is 6% in the United Kingdom, 2% in Switzerland, and 4% in the United States. What is your expected spot rate of the Swiss franc in one year with respect to the US dollar? Show your work.

Reference no: EM13935993

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