"Real" Spot Rate

Schweser book: Practice Exams: Exam #3 Afternoon, Question #109 Anyone know how you get the real spot rate from this question? Thanks,

Q109 on Exam 3PM is about Ethics. Could you clarify please?


I’m sorry about that. Exam 2: Afternoon, Question 109.

Spot rate times the consumption basket prices. ie Basket of goods in SF costs 150 SF Basket of goods in USD costs 300 USD Spot rate = $2/SF 2/SF x (150 SF/ 300) = $1/SF real rate

real spot=spot x (Pfc/Pdc) p=price level edit: take note spot is dc/fc, so the numerator rule doesn’t apply here (if you use schweser’s method)

Good stuff. I was trying to use the intrest rates and inflation rates, ie. Fisher Equation and it was not equaling out, so i knew some thing was up.

What about question #118. Does the answer seem right?

is the real exchange rate supposed to be 1 in the long-term? or do the units not matter? i was never sure how we’re quote the price levels?