1. Using the Cross-Rate

a. Which would you rather have, $100 or 100? Why?

b. Which would you rather have, $100 Canadian or 100? Why?

c. What is the cross-rate for Canadian dollars in terms of British pounds? For British pounds in terms of Canadian dollars?

2. Using Spot and Forward Exchange Rates

Suppose the spot exchange rate for the Canadian dollar is Can$1.34 and the six-month forward rate is Can$1.41.

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$3.50? 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.

TABLE 18_2 EXCHNGE RATES: MAY 5, 2021 \begin{tabular}{lrr} \hline \hline Country/Currency & USD Equiv & Currency per USD \\ \hline Americas & & \\ Argentina peso & .0107 & 5.6694 \\ Brazil real & -1868 & 5.35 .43 \\ Canada dollar & .8151 & 1.2269 \\ Chile peso & .001418 & 705.10 \\ Ecuador US dollar & 1 & 1 \\ Mexico peso & .049 .4 & 20.2585 \\ Uruguay peso & .02270 & 4.4 .0450 \end{tabular} Asia-Pacitic Australia dollar 1-mo forward 3-mos forward 6-mos forward China yuan Hong Kong dollar India rupee Indonesia rupiah Japan yen 1-mo forward 3-mos forward 6-mos forward Malaysia ringgit New Zealand dollar Pakistan rupee Philippines peso Singapore dollar South Korea won Taiwan dollar Thailand baht Vietnam dong Europe Czech Rep. koruna Denmark krone Euro area euro Hungary forint Norway krone Poland zloty Romania leu Russia ruble Sweden krona Switzerland franc 1-mo forward 3-mos forward 6-mos forward Turkey lira UK pound I-mo foeward 3-mos forward 6-mos forward Middle East/Africa Bahrain dinar Egypt pound Israel shekel Kuwait dinar Oman sul rial Qatar rial Saudi Arabia riyal South Africa rand \begin{tabular}{|c|c|} \hline .7748 & 1.2907 \\ \hline .7749 & 1.2905 \\ \hline .7751 & 1.2902 \\ \hline .7753 & 1.2898 \\ \hline .1545 & 6.4336 \\ \hline .1287 & 7.7699 \\ \hline .01355 & 33.79165 \\ \hline .0000693 & 14435 \\ \hline .00916 & 109.20 \\ \hline .00914 & 109.42 \\ \hline .00908 & 110.08 \\ \hline 00899 & 111.21 \\ \hline .2429 & 4.1175 \\ \hline .7215 & 1.3860 \\ \hline .00654 & 152.92 \\ \hline .0208 & 48.0270 \\ \hline .7487 & 1.3356 \\ \hline .0008889 & 1124.99 \\ \hline .03576 & 27.97 \\ \hline .03213 & 31.120 \\ \hline .00004336 & 23062 \\ \hline .04655 & 21.484 \\ \hline .1615 & 6.1917 \\ \hline 1.2006 & .8330 \\ \hline .00334459 & 298.99 \\ \hline .1197 & 8.3554 \\ \hline .2725 & 3.6701 \\ \hline .2626 & 3.8084 \\ \hline .01337 & 74.797 \\ \hline .1178 & 8.4862 \\ \hline 1.0952 & .9134 \\ \hline 1.0945 & -9137 \\ \hline 1.0931 & .9145 \\ \hline 1.0909 & -9167 \\ \hline .1202 & 8.3175 \\ \hline 1.3909 & .7190 \\ \hline 1.3910 & .3189 \\ \hline 1.3912 & .3188 \\ \hline 1.3914 & .7187 \\ \hline \end{tabular} \begin{tabular}{rr} 2.65415 & -3768 \\ .0638 & 15.6682 \\ .3062 & 3.2654 \\ 3.3164 & .3015 \\ 2.59757 & .38 \\ .2746 & 3.6410 \\ .2667 & 3.7501 \\ .0696 & 14.3688 \end{tabular} TABLE 18_2 EXCHNGE RATES: MAY 5, 2021 \begin{tabular}{lrr} \hline \hline Country/Currency & USD Equiv & Currency per USD \\ \hline Americas & & \\ Argentina peso & .0107 & 5.6694 \\ Brazil real & -1868 & 5.35 .43 \\ Canada dollar & .8151 & 1.2269 \\ Chile peso & .001418 & 705.10 \\ Ecuador US dollar & 1 & 1 \\ Mexico peso & .049 .4 & 20.2585 \\ Uruguay peso & .02270 & 4.4 .0450 \end{tabular} Asia-Pacitic Australia dollar 1-mo forward 3-mos forward 6-mos forward China yuan Hong Kong dollar India rupee Indonesia rupiah Japan yen 1-mo forward 3-mos forward 6-mos forward Malaysia ringgit New Zealand dollar Pakistan rupee Philippines peso Singapore dollar South Korea won Taiwan dollar Thailand baht Vietnam dong Europe Czech Rep. koruna Denmark krone Euro area euro Hungary forint Norway krone Poland zloty Romania leu Russia ruble Sweden krona Switzerland franc 1-mo forward 3-mos forward 6-mos forward Turkey lira UK pound I-mo foeward 3-mos forward 6-mos forward Middle East/Africa Bahrain dinar Egypt pound Israel shekel Kuwait dinar Oman sul rial Qatar rial Saudi Arabia riyal South Africa rand \begin{tabular}{|c|c|} \hline .7748 & 1.2907 \\ \hline .7749 & 1.2905 \\ \hline .7751 & 1.2902 \\ \hline .7753 & 1.2898 \\ \hline .1545 & 6.4336 \\ \hline .1287 & 7.7699 \\ \hline .01355 & 33.79165 \\ \hline .0000693 & 14435 \\ \hline .00916 & 109.20 \\ \hline .00914 & 109.42 \\ \hline .00908 & 110.08 \\ \hline 00899 & 111.21 \\ \hline .2429 & 4.1175 \\ \hline .7215 & 1.3860 \\ \hline .00654 & 152.92 \\ \hline .0208 & 48.0270 \\ \hline .7487 & 1.3356 \\ \hline .0008889 & 1124.99 \\ \hline .03576 & 27.97 \\ \hline .03213 & 31.120 \\ \hline .00004336 & 23062 \\ \hline .04655 & 21.484 \\ \hline .1615 & 6.1917 \\ \hline 1.2006 & .8330 \\ \hline .00334459 & 298.99 \\ \hline .1197 & 8.3554 \\ \hline .2725 & 3.6701 \\ \hline .2626 & 3.8084 \\ \hline .01337 & 74.797 \\ \hline .1178 & 8.4862 \\ \hline 1.0952 & .9134 \\ \hline 1.0945 & -9137 \\ \hline 1.0931 & .9145 \\ \hline 1.0909 & -9167 \\ \hline .1202 & 8.3175 \\ \hline 1.3909 & .7190 \\ \hline 1.3910 & .3189 \\ \hline 1.3912 & .3188 \\ \hline 1.3914 & .7187 \\ \hline \end{tabular} \begin{tabular}{rr} 2.65415 & -3768 \\ .0638 & 15.6682 \\ .3062 & 3.2654 \\ 3.3164 & .3015 \\ 2.59757 & .38 \\ .2746 & 3.6410 \\ .2667 & 3.7501 \\ .0696 & 14.3688 \end{tabular}