If a U.S. dollar currently purchases 1.3 Canadian dollars and the inflation rate in Canada over the next year is 5 percent while it is 2 percent in the U.S., we should expect a U.S. dollar to purchase:
A. 1.365 Canadian dollars.
B. 1.300 Canadian dollars.
C. 1.339 Canadian dollars.
D. 1.262 Canadian dollars.
Answer: C
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