Homework Answers
Ans
A. U.S.dollar is more valuable. 1 U.S. dollar is equivalent to 1.12 canadian dollar so it is more valuable.
B. The cost of an Elkhead beer in U.S. dollar terms is 2.223 dollar
C. .U. S. Dollar is trading at discount to Canadian dollar because Canadian dollar is trading at 1.12 dollar to 1 u.s. dollar and forward rate is also expected to move up to 1.17 dollar .
D. U.S. dollar is expected to appreciate in comparison to Canadian dollar.
E.Canada should have higher intrest rates in comparison to united states .
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Suppose the spot exchange rate for the Canadian dollar is Can$1.12 and the six-month forward rate...
Suppose the spot exchange rate for the Canadian dollar is Can$1.07 and the six-month forward rate...
Suppose the spot exchange rate for the Canadian dollar is Can$1.07 and the six-month forward rate is Can$1.09. a. Which is worth more, a U.S. dollar or a Canadian dollar? O U.S. dollar 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$2.60? (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...
Suppose the spot exchange rate for the Canadian dollar is C$1.09 and the six-month forward rate...
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question 3 and 4(just part C) Thank you. 3. Forward Exchange Rates If the $/€ spot...
question 3 and 4(just part C)
Thank you.
3. Forward Exchange Rates If the $/€ spot rate is $1.14/€ and three-month fc $1.15/€? Is the dollar selling at a premium or a discount? Explain. 4. Using Spot and Forward Exchange Rates Suppose the spot exchange rate for the South African rand is R15/£ and the six-month forward rate is R16/£. (a) Which is worth more, the British pound or the South African rand? (b) Assuming absolute PPP holds, what is...
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Assume the following information: Spot rate of Canadian dollar : $.80 90-day forward rate of Canadian...
Assume the following information: Spot rate of Canadian dollar : $.80 90-day forward rate of Canadian dollar : $.79 90-day Canadian interest rate : 4% 90-day U.S. interest rate : 2.5% a) What would be the return to a U.S. investor who used covered interest arbitrage from investing in Canada? (assume the investor invests $1,000,000). Does the return exceed the return from investing in the U.S. over the 90-day period? Is it worthwhile for the U.S. investor to invest in...
5. Suppose the current spot exchange rate is $1.17 to €1. The dollar is expected to...
5. Suppose the current spot exchange rate is $1.17 to €1. The dollar is expected to appreciate to $1.11 to €1 during the next year. (Assume inflation and risk etc. are the same between the Eurozone and the U.S.) (a) What is the expected currency appreciation gain for the dollar? (Give this as a percentage and round to the nearest 0.1%.) (b) Suppose the interest rate on 1-year corporate bonds in the U.S. is 4%. What is the expected total...
1. Assume the following information: Spot rate of Canadian dollar : $.80 90-day forward rate of Canadian dollar : $.79 9...
1. Assume the following information: Spot rate of Canadian dollar : $.80 90-day forward rate of Canadian dollar : $.79 90-day Canadian interest rate : 4% 90-day U.S. interest rate : 2.5% a) What would be the return to a U.S. investor who used covered interest arbitrage from investing in Canada? (assume the investor invests $1,000,000). Does the return exceed the return from investing in the U.S. over the 90-day period? Is it worthwhile for the U.S. investor to invest...
Several factors affect the exchange rate of a currency with another currency. Which of the following...
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a. Gold Is $350 per ounce In the United States and 2.800 pesos per ounce In Mexico. The nominal exchange rate between U.S. dollar and Mexican pesos that is Implled by the PPP theory Is: pesos. b. Mexico experiences Inflation so that the price of gold rises to 4,200 pesos per ounce, whlle the price of gold remalns $350 per ounce In the United States. The nominal exchange rate between U.S. dollars and Mexican pesos that is Implied by the...
Suppose the spot exchange rate for the Canadian dollar is Can$1.07 and the six-month forward rate is Can$1.09. a. Which is worth more, a U.S. dollar or a Canadian dollar? O U.S. dollar 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$2.60? (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...
question 3 and 4(just part C)
Thank you.
3. Forward Exchange Rates If the $/€ spot rate is $1.14/€ and three-month fc $1.15/€? Is the dollar selling at a premium or a discount? Explain. 4. Using Spot and Forward Exchange Rates Suppose the spot exchange rate for the South African rand is R15/£ and the six-month forward rate is R16/£. (a) Which is worth more, the British pound or the South African rand? (b) Assuming absolute PPP holds, what is...
Several factors affect the exchange rate of a currency with another currency. Which of the following statements are true about the factors that have an impact on exchange rates? Check all that apply. When a government limits imports and restricts foreign exchange transactions, its currency's value tends to increase relative to other currencies. An increase in inflation tends to increase the currency's value with respect to other currencies with lower inflation. If a government intends to prevent its currency's value...
a. Gold Is $350 per ounce In the United States and 2.800 pesos per ounce In Mexico. The nominal exchange rate between U.S. dollar and Mexican pesos that is Implled by the PPP theory Is: pesos. b. Mexico experiences Inflation so that the price of gold rises to 4,200 pesos per ounce, whlle the price of gold remalns $350 per ounce In the United States. The nominal exchange rate between U.S. dollars and Mexican pesos that is Implied by the...
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