Two Identical Items Are Manufactured in Both Australia and the USA.Using

Multiple Choice

Two identical items are manufactured in both Australia and the USA.Using your knowledge of the purchasing power parity theory and the following data,forecast the AUD/USD exchange rate in years 2 and 3. $$\begin{array} { | l | l | l | l | } \hline & \text { Price (AUD) } & \text { Price (USD) } & \text { AUD/USD } \\\hline \text { Year 1 } & \$ 17.50 & \$ 13.60 & 0.7680 \\\hline \text { Year 2 } & \$ 19.25 & \$ 14.28 & ? \\\hline \text { Year 3 } & \$ 19.25 & \$ 14.99 & ? \\\hline\end{array}$$

A) 0.7296 and 0.7661
B) 0.8064 and 0.7661
C) 0.8064 and 0.8467
D) 0.8448 and 0.8870