2.	If the annual inflation rate is 5.5 percent in the United States
and 4 percent in the U.K., and the dollar depreciated against the
pound by 3 percent, then what is the real exchange rate, assuming that
PPP initially held?

The real exchange rate of  the dollar against the pound also
depreciated by 3 percent because the key factor for the difference
between the nominal and real exchange rates of two currencies is the
rate of inflation, and it is assumed that inflation rates remain the
same (5.5 percent in US and 4 percent in UK) and that PPP initially
held.