Suppose the initial exchange rate between the USD and BRL is 5.65 = 1 USD,...
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Suppose the initial exchange rate between the USD and BRL is 5.65 = 1 USD, and that after 5 years the observed nominal exchange rate is S5 is 5.99 = 1 USD. Over the course of the 5 years, US inflation averaged 2% and inflation in Brazil averaged 4.75% per year. This means that after 5 years, the price level in the US was 110.41 and in Brazil it was 126.12 After 5 years, what was the real BRL/USD exchange rate, q5? _____ BRL = 1 USD Include two decimal places in your answer.
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