In one year, you will visit your Swiss cousin Lucerne and want to buy a Swiss watch there. You'll use the idea you just hear about in International Finance, Purchasing Power Parity, to estimate the watch cost. Today's Swiss watch cost CHF500. The exchange rate today is .98 CHF/1 USD. Inflation in US is expected to be 2% and 1% in Switzerland. How many dollars will you need to pay for the watch one year from now?
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