1. The inflation rate in U.S. is 2.3%, and the inflation rate in Japan is 9.7%. The current exchange rate is 94 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. Assume the following information: Exchange rate of Singapore dollar in USD = 0.34 USD/SGD Exchange rate of pound in USD = 1.48 USD/GBP Exchange rate of pound in Singapore dollars = 4.82 SGD/GBP If you have 1 million USD to conduct one cycle of triangular arbitrage, what will be your profit?