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In 2020, the price for silver in the U.S. was $15 and 315 Rand in South...

In 2020, the price for silver in the U.S. was $15 and 315 Rand in South Africa. In 2040, you are told that the US has had 75% inflation over the period and South Africa had 265%. What should the exchange rate be in 2040 (using e from the US perspective)?

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Answer #1

In 2020, the exchange rate will be:  $1=21 Rand (U.S:SA = 315/15)

Due to 75% inflation in the U.S, the price of silver in 2040 will be 26.25 ( 0.7515 + 15)

Due to 265% inflation in South Africa, the price of silver in 2040 will be 1149.75 ( 2.65315 + 315)

In 2040, the exchange rate will be $1=43.8 Rand (U.S:SA = 1149.75/26.25)

Dear Student/ Learner, it was my great pleasure to help you solving this problem. I wish you best luck for your learning endeavour.
Happy Learning

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