CH 18 Drill Q2 Need help with Question B. Converting. Suppose the spot exchange
ID: 2754466 • Letter: C
Question
CH 18 Drill Q2 Need help with Question B. Converting.
Suppose the spot exchange rate for the Canadian dollar is Can $1.11 and the six-month forward rate is Can $1.13.
Assuming absolute PPP holds, what is the cost in the United States of an Elkhead beer if the price in Canada is Can$3.39? (Enter your answer as directed, but do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)
Part 2
Suppose the current exchange rate for the Russian ruble is RUB 34.52. The expected exchange rate in three years is RUB 37.76. Assume that the anticipated inflation rate is constant for both countries.(Enter your answer as directed, but do not round intermediate calculations.)
What is the difference in the annual inflation rates for the United States and Russia over this period? (Negative amount should be indicated by a minus sign. Enter your answer as a percent rounded to 2 decimal places (e.g., 32.16).)
Suppose the spot exchange rate for the Canadian dollar is Can $1.11 and the six-month forward rate is Can $1.13.
Explanation / Answer
1 US $ = 1.11 Can $ as we required more canadian dollar for 1 US dollar The US Dollar worths more If price is CAN $ 3.39 US price = 3.39*1.13 3.8307 The price is US $ 3.8307