Question
A Big Mac costs USD 5.50 and CAD 7.15. The one year forward rate is USD 0.787, the CAD risk free rate is 2.1%. A.
A Big Mac costs USD 5.50 and CAD 7.15. The one year forward rate is USD 0.787, the CAD risk free rate is 2.1%.
A. What is the PPP exchange rate? -Note: I correct answered 0.7692USD/CAD, I'm interested in question B.
B. If the law of one price holds, what does IRP suggest that the USD risk free rate is?
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Financial Markets And Institutions
Authors: Jeff Madura
13th Edition
0357130790, 978-0357130797
