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Purchasing Power Parity Theory using Inflation Formula

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Exchange Rate Factor refers to the exchange of the domestic currency for foreign currency vice versa. Check FAQs

E f = (\frac{1 + Ιh}{1 + Ιf}) - 1

E_f - Exchange Rate Factor?Ιh - Inflation in Home Country?Ιf - Inflation in Foreign Country?

Purchasing Power Parity Theory using Inflation Example

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Here is how the Purchasing Power Parity Theory using Inflation equation looks like with Values.

Here is how the Purchasing Power Parity Theory using Inflation equation looks like with Units.

Here is how the Purchasing Power Parity Theory using Inflation equation looks like.

0.0373 = (\frac{1 + 0.39}{1 + 0.34}) - 1

0.0373 = (\frac{1 + 0.39}{1 + 0.34}) - 1

0.0373 = (\frac{1 + 0.39}{1 + 0.34}) - 1

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Purchasing Power Parity Theory using Inflation Solution

Follow our step by step solution on how to calculate Purchasing Power Parity Theory using Inflation?

FIRST Step Consider the formula

E f = (\frac{1 + Ιh}{1 + Ιf}) - 1

Next Step Substitute values of Variables

∴

E f = (\frac{1 + 0.39}{1 + 0.34}) - 1

Next Step Prepare to Evaluate

∴

E f = (\frac{1 + 0.39}{1 + 0.34}) - 1

Next Step Evaluate

∴

E f = 0.0373134328358209

LAST Step Rounding Answer

∴

E f = 0.0373

Purchasing Power Parity Theory using Inflation Formula Elements

Variables

Exchange Rate Factor

Exchange Rate Factor refers to the exchange of the domestic currency for foreign currency vice versa.

Symbol: E_f

Measurement: NAUnit: Unitless

Note: Value should be greater than 0.

Formulas to find Exchange Rate Factor

Inflation in Home Country

Inflation in Home Country refers to the inflation rate in the home country which impacts the performance on the home currency in the forex market.

Symbol: Ιh

Measurement: NAUnit: Unitless

Note: Value should be greater than 0.

Formulas to find Inflation in Home Country

Inflation in Foreign Country

Inflation in Foreign Country refers to the general increase in prices of goods and services over time within that specific country's economy.

Symbol: Ιf

Measurement: NAUnit: Unitless

Note: Value should be greater than 0.

Formulas to find Inflation in Foreign Country

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Go Black-Scholes-Merton Option Pricing Model for Call Option

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P = K \cdot \exp (- R f \cdot t s) \cdot (- D 2) - P c \cdot (- D 1)

How to Evaluate Purchasing Power Parity Theory using Inflation?

Purchasing Power Parity Theory using Inflation evaluator uses Exchange Rate Factor = ((1+Inflation in Home Country)/(1+Inflation in Foreign Country))-1 to evaluate the Exchange Rate Factor, The Purchasing Power Parity Theory using Inflation formula is defined as the theory which explains exchange rate between two countries will adjust in such a way that there is no difference in the purchasing price in both home currency and foreign currency on the basis of inflation rates. Exchange Rate Factor is denoted by E_f symbol.

How to evaluate Purchasing Power Parity Theory using Inflation using this online evaluator? To use this online evaluator for Purchasing Power Parity Theory using Inflation, enter Inflation in Home Country (Ιh) & Inflation in Foreign Country (Ιf) and hit the calculate button.

FAQs on Purchasing Power Parity Theory using Inflation

What is the formula to find Purchasing Power Parity Theory using Inflation?

The formula of Purchasing Power Parity Theory using Inflation is expressed as Exchange Rate Factor = ((1+Inflation in Home Country)/(1+Inflation in Foreign Country))-1. Here is an example- 0.037313 = ((1+0.39)/(1+0.34))-1.

How to calculate Purchasing Power Parity Theory using Inflation?

With Inflation in Home Country (Ιh) & Inflation in Foreign Country (Ιf) we can find Purchasing Power Parity Theory using Inflation using the formula - Exchange Rate Factor = ((1+Inflation in Home Country)/(1+Inflation in Foreign Country))-1.

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Purchasing Power Parity Theory using Inflation Formula

Purchasing Power Parity Theory using Inflation Example

Purchasing Power Parity Theory using Inflation Solution

Purchasing Power Parity Theory using Inflation Formula Elements

Other formulas in Forex Management category

How to Evaluate Purchasing Power Parity Theory using Inflation?

FAQs on Purchasing Power Parity Theory using Inflation

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