A couple of issues im finding confusing in reading 62. Any help would be appreciated.
For both these questions when calculating the returns from foreign investments they use a multiplicative formulas (1+return)(1+appre/depreofcurrency)-1. However in the reading p 488 the formula is an addition formula Rfc+s. The results are different depending on which one you use.
If you follow through with the multiplicative formula and substitue for appre/depre using (x2-x1)/x1 the answer will be different than if you use the way the answer is in the book. The way they do it in the book is using inflation differential instead of (x2-x1)/x1 where x2 is ppp formula (s * 1+idc/1+ifc)