Question
Please help me?? The Economist publishes annually the Big Mac Index by which they compare the prices of the McDonald's Corporation's Big Mac hamburger around
Please help me??
The Economistpublishes annually the "Big Mac Index" by which they compare the prices of the McDonald's Corporation's Big Mac hamburger around the world. The index estimates the exchange rates for currencies based on the assumption that the burgers in question are the same across the world and therefore, the price should be the same. If a Big Mac costs $2.54 in the United States and 294 yen in Japan, what is the estimated exchange rate of yen per dollar as hypothesized by the Hamburger index?
A) $0.0086/
B) 124/$
C) $0.0081/
D) 115.75/$
According to the International Fisher Effect, the forecast change in the spot rate between two countries is equal to:
A) the current spot rate multiplied by the ratio of the inflation rates in the respective countries.
B) but the opposite sign to the difference between nominal interest rates.
C) but the opposite sign to the difference between inflation rates.
D) but the opposite sign to the difference between real interest rates.
- An investor purchases a five-year U.S. bond that has an annual interest rate of 5% rather than a comparable British bond that has an annual interest rate of 6%, then according to the International Fisher Effect,_________ will ___________ at a rate of around 1% per year over the next 5 years.
- (a) British pound; appreciate
- (b) British pound; revalue
- (c) U.S. dollar; appreciate
- (d) U.S. dollar; depreciate
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