please answer all parts of question 6.
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. (S0)
The current exchange rate (S1) = ?
As per PPP
S1/S0 = (1+inflation of USD)/(1+inflation of Canada)
S1÷1 = (1+0.01)/(1+0.04)
S1 = 1.01/1.04
S1 = 0.97
The current exchange rate (S1): $/C$= 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
please answer all parts of question 6. 6.5) Other things equal, and assuming efficient markets, if...
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