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Answer:
The budgeted $ amount is $13,680.88
Explanation:
The purchasing power parity formula gives us an idea what an exchange spot rate would be in future period using the below formula:
Future spot rate=current spot rate*(1+US inflation)/(1+French inflation)
current spot rate=$1.3620
US inflation rate is 2.50%
French inflation is 3.50%
Future spot rate=$1.3620*(1+2.5%)/(1+3.5%)
future spot rate=$1.3488
The weekly cost of vacation would also be adjusted for inflation rate in France as follows:
Adjusted price=9800*(1+3.5%)=10143
Hence the cost of the one week rental would be 10143 multiplied by the future spot exchange rate of 1.3488 i.e $ 13,680.88 (10143*1.3488)
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