Suppose that S = $1.1045/€. The annualized inflation rates are 2.6% and 1.75% in the U.S and Germany, respectively. Find the exact expected currency movement for the euro in 5 years. Do not write any symbol. Express your answers as a percentage. Make sure to round your answers to the nearest 100th decimal points. For example, write 2.45 for 2.45%.
5-Suppose that S = $1.1045/€. The annualized risk-free interest rates are 6% and 3% in the U.S and Germany, respectively. The inflation rate in the US is 2.5%. Find the exact expected exchange rate for the euro in one year. Do not write any symbol. Make sure to round your answers to the nearest 10000th decimal points. For example, write 1.2345 for $1.2345/€.
