CH 18 TEST

Currently, $1 will buy C$1.46 while $1.29 will buy 1. What is the exchange rate between the Canadian dollar and the euro? C$1 = 0.685 C$1.46 = 0.5310 C$1 = 0.5310 C$1.46 = 1.29 C$1 = 1.29

The camera you want to buy costs $435 in the U.S. If absolute purchasing power parity exists, the identical camera will cost _____ in Canada if the exchange rate is C$1 = $0.7529.

C$327.51 C$577.77 C$576.44 C$433.67 C$579.10

The current spot rate is C$1.376 and the one-year forward rate is C$1.318. The nominal risk-free rate in Canada is 4 percent while it is 8 percent in the U.S. Using covered interest arbitrage you can earn an extra _____ profit over that which you would earn if you invested $1 in the U.S.

$0.0780 $0.0058 $0.0838 $0.0000 $0.0458

The spot rate for the Japanese yen currently is 124 per $1. The one-year forward rate is 123 per $1. A risk-free asset in Japan is currently earning 8 percent. If interest rate parity holds, what rate can you earn on a one-year risk-free U.S. security?

8.96 percent 7.21 percent 8.80 percent 7.13 percent 8.88 percent