Part 7. Exchange rates. Suppose the spot exchange rate for the Canadian dollar is Can$1.15 and the six-month forward rate is Can$1.19. Note: Both exchange rates are expressed as the number of units of foreign currency per U.S. dollar. Question 1: Assuming purchasing power parity (PPP) holds, what is the cost in the U.S. of a Moosehead beer if the price in Canada is Can$2.50? Check figure: U.S.$2.17. Question 2: Identify two reasons why PPP or the "law of one price" may be violated or may not hold. Question 3: Is the Canadian dollar selling at a premium or a discount relative to the U.S. dollar in the forward market? Explain. Question 4: Explain which currency (U.S. dollar or Canadian dollar) is expected to appreciate in value.