If the purchasing power parity holds what should be the new


1. The inflation rate in U.S. is 3%, and the inflation rate in Japan is 9%. The current exchange rate is 81 JPY/USD. If the purchasing power parity holds, what should be the new JPY/USD exchange rate at the end of the year?

Note that an indirect exchange rate is provided.

2. Compute the monthly payments on a 3-year lease for a $29541 car if the annual rate of depreciation is 19% and the lease's annual interest rate is 4%.

3. If inflation is increasing, it is expected that bond rates will increase.This will cause:

A. Yields will rise and bond prices will rise

B. Yields will fall and bond prices will rise

C. Yields will rise and bond prices will fall

D. Yield will fall and bond prices will fall

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