Terry Lamoreaux has homes in both? Sydney, Australia and? Phoenix, Arizona. He travels between the two cities at least twice a year. Because of his frequent trips he wants to buy some? new, high quality luggage.? He's done his research and has decided to go with a Briggs and Riley brand? three-piece luggage set. There are retails stores in both Phoenix and Sydney. Terry was a finance major and wants to use purchasing power parity to determine if he is paying the same price no matter where he makes his purchase.
a. If the price of the? 3-piece luggage set in Phoenix is ?$857 and the price of the same? 3-piece set in Sydney is A $930?,using purchasing power? parity, is the price of the luggage truly equal if the spot rate is
b. If the price of the luggage remains the same in Phoenix one year from? now, determine what the price of the luggage should be in Sydney in? one-year's time if PPP holds true. The U.S. Inflation rate is 1.14?% and the Australian inflation rate is 3.18?%.