Question: Suppose spot exchange rate E /$ = 85. If the price of a music compact disc (CD) is $18 in the U.S. and the same

Suppose spot exchange rate E_/$ = 85. If the price of a music compact disc (CD) is $18 in the U.S. and the same CD costs 1,900 yen in Japan, then the dollar price of CDs sold in Japan is _____, which implies the law of one price _____.

$105.55; does not hold

$18; holds

$10.5; does not hold

$21; does not hold

$22.35; does not hold

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