You are planning a 30-day vacation on Langkawi Island,

1. You are planning a 30-day vacation on Langkawi Island, Malaysia, one year from now. The present charge for a luxury suite plus meals in Malaysian ringgit (RM) is RM1,050/day. The Malaysian ringgit presently trades at RM3.75/$. Hence, the dollar cost today for a 30-day stay would be $8,400. The hotel has informed you that any increase in its room charges will be limited to any increase in the Malaysian cost of living. Malaysian inflation is expected to be 4% per annum, while

U.S. inflation is expected to be only 1%.

1. How many dollars might you expect to need one year hence for your 30-day vacation?
2. By what percent has the dollar cost gone up? Why? Answer: