One year ago, the spot exchange rate between Japanese yen and Swiss franc was ¥/SFr = ¥160/SFr. Today, the spot rate is S0¥/SFr = ¥155/SFr. Inflation during the year was p¥ = 2 percent and pSFr = 3 percent in Japan and Switzerland, respectively.
a. What was the percentage change in the nominal value of the Swiss franc?
b. One year ago, what nominal exchange rate would you have predicted for today based on the difference in inflation rates?
c. What was the percentage change in the real exchange rate, x0¥/SFr, during the year?
d. What was the percentage change in the relative purchasing power of the franc?
e. What was the percentage change in the relative purchasing power of the yen?