Suppose Canadian wheat sells for $100 per bushel and Russian wheat sells for 1600 rubles per bushel.

Question:

Suppose Canadian wheat sells for $100 per bushel and Russian wheat sells for 1600 rubles per bushel.
a. If you believe that the purchasing-power parity theory holds, and if the current is 12 rubles per dollar, would you expect the to change? In what direction? (3 marks)
b. If the current is 12 rubles per dollar, how much is the real based on the prices of wheat? (3 marks)
c. If the is 12, how you could make profit in this situation? How much profit per bushel you could make? (4 marks)

Exchange Rate
The value of one currency for the purpose of conversion to another. Exchange Rate means on any day, for purposes of determining the Dollar Equivalent of any currency other than Dollars, the rate at which such currency may be exchanged into Dollars...