Define absolute and relative purchasing power parity

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1. A 2018 BMW 735i costs 75,000 Euros when purchased in Germany. (10 pts) How much will an American consumer pay in US Dollar if the nominal exchange rate is 0.81570 EUR/1US$ (Assume no transactions costs)?

2. BioScience Inc. will pay a common stock dividend of $6.50 at the end of the year (D1). The required return on common stock (Ke) is 20 percent. The firm has a constant growth rate (g) of 9 percent. Compute the current price of the stock (P0).

3. Please define absolute and relative purchasing power parity, interest rate parity, and unbiased forward rates. What is the fundamental relationship between these international financial variables?

Reference no: EM131978716

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