Question
Harmony is a South African mining company that exports 21 ounces of gold to the US. Gold is priced in US dollars but Harmonys workers
Harmony is a South African mining company that exports 21 ounces of gold to the US. Gold is priced in US dollars but Harmonys workers are paid in rand (the currency of South Africa). The current price of gold is 1,764 dollars per ounce. The current exchange rate is 18.66 rand (R) per $1. Harmonys current mining costs are R14 per ounce. Expected one-year inflation rates are 1 in the U.S. and 5 in South Africa (in%).
If the exchange rate in one year is consistent with PPP, what is the gold price that would maintain Harmony's profits constant in real terms? Enter your answer with no decimals (so enter 9.8 as 10)
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