You are asked to consider factors that might influence the value of the US Dollar ($) in terms of the Japanese Yen (¥).
Assume that the current spot price of the dollar in terms of the yen is currently at ¥/$=79.5
Further assume that the expected rate of inflation in the US and Japan for the next year are 5% and 2% respectively. If relative purchasing power parity holds, what will be the spot price of the dollar in terms of yen one year from today?