Stalla Question on Real Exchange Rate investing, exchange, between, current

lucasg85

I really don’t get their explanation on this with lots of symbols and stuff (please show your work so I know what’s going on):
John Smith is a U.S. Bond portfolio manager. John is considering investing in a portfolio of Canadian dollar-denominated bonds. The current nominal spot exchange rate between the U.S. and Canada is 0.65 USD/CAD. The price level of the typical consumption basket in the U.S. to the price level of the typical consumption basket in Canada is 0.65 to 1.
A year later the inflation rates have indeed been 5 percent for U.S. and 3 percent for Canada. However, the Canadian dollar has depreciated with an exchange rate of 0.61 USD/CAD at the end of year one. Assuming the real exchange rate is 1 at the beginning of the year, the real exchange rate at the end of the year is approximately:
A. 0.96 USD/CAD
B. 0.94 USD/CAD
C. 0.92 USD/CAD