Top answer: You observe the following current rates and prices today: the spot…

  

You observe the following current rates and prices today: the spot… You observe the following current rates and prices today:the spot exchange rate today: AU$1.50 per U.K pound;the expected one-year ahead inflation rate in Australia: i($) = 4%;the expected one-year ahead inflation rate in the U.K.: i(euro) = 5%;the price level in Australia today: AU$3.60; andthe price level in the U.K. today: 2.00 poundsBased on the speed of convergence for the deviation from the purchasing power parity, which says the deviation will shrink by 15% per year, calculate the expected 1-year ahead spot exchange rate of Australian dollars against the U.K. pound, Ee($/pound) (rounding to 3 decimal places). Show all working to get full marks. Business Economics ECF 2721