Q$4.$ Suppose the spot exchange rate for the Canadian dollar is Can $$1\mathrm{.}29$ and the six$-$month forward rate is Can$$1\mathrm{.}31.$

a$.$ Which is worth more, a U$.$S$.$ dollar or a Canadian dollar?

b$.$ Assuming absolute PPP holds, what is the cost in the United States of an Elkhead beer if the price in Canada is Can $$2\mathrm{.}50?$ Why might the beer actually sell at a different price in the United States?

c$.$ Is the U$.$S$.$ dollar selling at a premium or a discount relative to the Canadian dollar?

d$.$ Which currency is expected to appreciate in value?

e$.$ Which country do you think has higher interest rates$-$the United States or Canada? Explain.