Question
Suppose the spot exchange rate for the Canadian dollar is Can$1.01 and the six-month forward rate is Can$1.03. (Enter your answer as directed, but do
| Suppose the spot exchange rate for the Canadian dollar is Can$1.01 and the six-month forward rate is Can$1.03. (Enter your answer as directed, but do not round intermediate calculations.) |
| Required: |
| (a) | Which is worth more, a U.S. dollar or a Canadian dollar? |
| (Click to select)Canadian dollarU.S. 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$2.49? (Round your answer to 2 decimal places (e.g., 32.16).) |
| Cost in U.S dollar | $ |
| (c) | Is the U.S. dollar selling at a premium or a discount relative to the Canadian dollar? |
| (Click to select)discountpremium |
| (d) | Which currency is expected to appreciate in value? |
| (Click to select)Canadian dollarU.S. dollar |
| (e) | Which country do you think has higher interest ratesthe United States or Canada? |
| (Click to select)CanadaUnited States |
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Personal Finance QuickStart Guide
Authors: Morgen Rochard
1st Edition
1945051019, 978-1945051012
