Suppose the current exchange rate for the Polish zloty is Z 2.18. The expected exchange rate...
Suppose the current exchange rate for the Polish zloty is Z 2.18. The expected exchange rate in three years is Z 2.55. What is the difference in the annual inflation rates for the United States and Poland over this period? Assume that the anticipated rate is constant for both countries.
Homework Answers
Let inflation rate in US be us and in Poland be pol
(1+us)^3=2.18*(1+pol)^3/2.55
=>(1+us)/(1+pol)=(2.18/2.55)^(1/3)
=>(1+us)/(1+pol)=0.9491
=>us-pol=-5.09%
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Suppose the current exchange rate for the Polish zloty is Z
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