Question
Suppose the spot exchange rate for the Canadian dollar is Can$1.08 and the six-month forward rate is Can$1.10. a. Which is worth more, a U.S.
| Suppose the spot exchange rate for the Canadian dollar is Can$1.08 and the six-month forward rate is Can$1.10. |
| a. | Which is worth more, a U.S. dollar or a Canadian dollar? | ||||
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| b. | Assuming absolute PPP holds, what is the cost in the United States of an Elkhead beer if the price in Canada is Can$2.65? (Round your answer to 3 decimal places, e.g., 32.161.) |
| Cost in U.S. dollars | $ |
| c. | Is the U.S. dollar selling at a premium or a discount relative to the Canadian dollar? | ||||
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| d. | Which currency is expected to appreciate in value? | ||||
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| e. | Which country do you think has higher interest rates - the United States or Canada? | ||||
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Money Talks Explaining How Money Really Works
Authors: Nina Bandelj ,Frederick F. Wherry ,Viviana A. Zelizer
1st Edition
0691202893, 978-0691202891
