FIN 3551 – On January 1, 1990, the annual inflation rates in the U.S.

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January 12th, 2018

On January 1, 1990, the annual inflation rates in the U.S. and Greece were expected to be 3% and 8%, respectively. Assume the drachma was worth $.007 on that day. What was the expected spot rate in three years according to economic theory?

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