Lets’ say the currency is quoted as DC/FC on the equation it’s reversed? It’s not like the covered interest parity? I thought you had to keep the interest rates lined up across the equation? Relative PPP holds that exchange rate movements reflect differences in inflation rates between countries. The relative version depends on the growth rates of prices in two countries. It is the rate of inflation that is critical here. It is necessary to make a slight adjustment to the relative PPP equation to account for the compounded inflation rate over the time horizon if the problem involves multiple periods: St / S0 = (1 + iFC)t / (1 + iDC)t

you are solving for So in that case…so its a matter of algebra. I spent a couple minutes on this today. S[t] (FC/DC)/S[0] (FC/DC) = (1 + iFC)^t/(1 + iDC)^t…solve for S[0] and you will see the interest rates flip. Its safe to use the “line em up” assumption for everything except this specific type of question (monetary shock impact) I think…