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Trans-Atlantic Quotos. Separated by more than 3,000 nautical miles and five time zonos, monwy and...

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Trans-Atlantic Quotos. Separated by more than 3,000 nautical miles and five time zonos, monwy and foreign exchango markets in both London and New York aro vory efficient. The following information has been collected from the respective areas: New York Spot exchange rate (S/E) 1 year Treasury bill rate Expected Inflation rate London 1.3269 3.895% 1.3269 4.503 % 1.248 % Unknown a. What do the financial markets suggest for inflation in Europe next year? b. Estimato today's 1-year forward exchange rate between the dollar and the ouro. a. What do the financial markets suggest for inflation in Europe next year? The rate the financial markets supgest for inflation in Europe next year is 1%. (Round to three decimal places.)

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