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Suppose the spot exchange rate for the Canadian dollar is Can$1.02 and the six-month forward rate is Can$1.04. a. Which is worth more, a U.S.
Suppose the spot exchange rate for the Canadian dollar is Can$1.02 and the six-month forward rate is Can$1.04. |
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$3.15?(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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