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Determine the expected exchange rate in one year

Problem: Consider the following financial data:

                                                       UK DM
Inflation (expected annual)                10%     4%
1 Year Interest Rate    12%     ??
Spot Exchange Rate (DM/pound)                    3

Assuming the international parity conditions hold perfectly, what is the expected exchange rate in one year?

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Finance Basics: Determine the expected exchange rate in one year

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