Suppose that the current spot exchange rate of us dollars


Suppose that the current spot exchange rate of U.S. dollars for Russian rubles is $0.18/1ruble. The price of Russian-produced goods increases by 6 percent, and the U.S. price index increases by 2.5 percent. If an FI’s has a net exposure to Russian ruble of 50,000,000 ruble—based on the purchasing power parity (PPP) theorem—how much will be the potential loss or gain of the FI in US dollars in long run?

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Financial Management: Suppose that the current spot exchange rate of us dollars
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