Exam 4: Parity Conditions in International Finance and Currency Forecasting

Suppose the pound devalues from $1.25 at the start of the year to $1.00 at the end of the year.Inflation during the year is 15% in England and 5% in the U.S.What is the real devaluation ? or real revaluation + of the pound during the year?

Suppose the expected inflation in the U.S.on January 1,1988 was projected at 5% annually for the next 5 years and at 12% annually in Italy for the same time period,and the lira/$ spot rate that day was currently at L2400 = $1,then the PPP estimate of the spot rate five years from now was

When a rise in the expected inflation rate in one nation relative to others will be associated with an expected fall in the first nation's exchange rate accompanied by a rise of its expected interest rate relative to foreign expected interest rates,we are describing the