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Question: Your firm wants to convert $1.4 million Australian into U.S. dollars in purchase in 12 months. The spot rate is $0.9704 equals $1 Australian. The inflation rates in Australia and the United States are expected to be 6 percent and 2 percent, respectively. Using the concept of purchasing power parity (PPP) as it relates to future exchange rates, what will be the difference in costs between completing the transaction now and doing it in 12 months?

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