Question

6.5) Other things equal, and assuming efficient markets, if a Honda Accord costs $21,375 in the U.S. then at an exchange rateplease answer all parts of question 6.

0 0
Add a comment Improve this question Transcribed image text
Answer #1

6.5) Honda cost in US = $21,375

Exchange Rate: $/€ = 1.23

Therefore Home cost in France = 21,375/1.23 = €17,378.05

6.6) let the inflation in Canada = 4%

Then The inflation in USA is 3% less than Canada = 1%

One year ago $/C$ = 1. (S​​​​​​0​​​​​)

The current exchange rate (S​​​​​​1) = ?

As per PPP

S1/S0 = (1+inflation of USD)/(1+inflation of Canada)

S​​​​1​​​​​÷1 = (1+0.01)/(1+0.04)

S1 = 1.01/1.04

S1 = 0.97

The current exchange rate (S​​​​​​1): $/C$= 0.97

6.7)

Last year price is US = 150USD

This year Price in US = 155USD

% change in price = 155-150/150 = 3.33333%

Last year Exchange rate : USD/Euro = 1.25

This year exchange rate : USD/Euro = 1.30

% change in Exchange rates = 1.3-1.25/1.25 = 4%

Exchange rate pass through =

% change in Price /% change in Exchange rate.

3.3333/4 = 0.83325.

This means: For every 1% increase in the exchange rate, there has been a .83325% increase in the price of the DVD player.

6.8) Forward exchange rate after 90 days (£/$) = 0.701035

6.8 t/$0.6993()usp 3/ As per Intest Pate partly theory 4/- 1+tSA B 1+t88 a we have asuned yeae con tains 260dayg 1+(10C0.04 F

Add a comment
Know the answer?
Add Answer to:
please answer all parts of question 6. 6.5) Other things equal, and assuming efficient markets, if...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions
  • Several factors affect the exchange rate of a currency with another currency. Which of the following...

    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...

  • Module 9 – Foreign Exchange Rate Risk Homework Exercise Part 1 1. Suppose that the EUR:USD...

    Module 9 – Foreign Exchange Rate Risk Homework Exercise Part 1 1. Suppose that the EUR:USD is trading at 1.3342; the GBP:JPY is trading at 67.7600; and the EUR:GBP is trading at 0.8165. What should the USD:JPY rate be? 2. If a price index for US goods stands at 118.93 and the same price index for European goods (i.e., computed from the same consumption basket) stands at 183.34; what is the fair (under the theory of PPP) spot exchange rate...

  • Volkswagen's Hedging Strategy 1. Why did Volkswagen suffer a 95% drop in its 4th quarter, 2003 pr...

    Volkswagen's Hedging Strategy 1. Why did Volkswagen suffer a 95% drop in its 4th quarter, 2003 profits? 2. Do you think the Volkswagen’s decision to hedge only 30% of its anticipated U.S. sales was a good? Why or why not? 3. Do you think the Volkswagen’s decision to revert back to hedging 70% of its foreign currency exposure was a good decision? Why or why not? Embraer and the Wild Ride of the Brazilian Real 4. Is a decline in...

  • CASE 1-5 Financial Statement Ratio Computation Refer to Campbell Soup Company's financial Campbell Soup statements in...

    CASE 1-5 Financial Statement Ratio Computation Refer to Campbell Soup Company's financial Campbell Soup statements in Appendix A. Required: Compute the following ratios for Year 11. Liquidity ratios: Asset utilization ratios:* a. Current ratio n. Cash turnover b. Acid-test ratio 0. Accounts receivable turnover c. Days to sell inventory p. Inventory turnover d. Collection period 4. Working capital turnover Capital structure and solvency ratios: 1. Fixed assets turnover e. Total debt to total equity s. Total assets turnover f. Long-term...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT