Question
Q4. Suppose that The United States and Japan only produce one good Roller Skates. Further, assume that Japanese produced roller skates and American roller skates
Q4. Suppose that The United States and Japan only produce one good Roller Skates. Further, assume that Japanese produced roller skates and American roller skates are identical in every way.
a)If the American price of roller skates is $40 and the Japanese price of roller skates is 4,300 Yen, what should the USDJPY exchange rate be?
b) Now, suppose that it costs $5/pair to ship roller skates from the US to Japan. Within what range could the nominal exchange rate fluctuate without creating an arbitrage opportunity in roller skates?
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Financial Management Principles And Applications
Authors: J William Petty, Sheridan Titman, Arthur J Keown, John D Martin, Peter Martin, Michael Burrow, Hoa Nguyen
6th Edition
1442539178, 9781442539174
