Euro spot exchange rate-euro exchange rate

Assignment Help Business Economics

Reference no: EM131091360

Two countries, France and the US produce just one good – chicken. Suppose that the price of beef in the US is $2.80 per kilogram, and in France it is 3.70 EURO per kilogram. a. According to PPP theory, what should be the $/EURO spot exchange rate? b. Suppose that the price of beef is expected to rise to $3.10 in the US, and to 4.65 EURO in France. What should be the one year forward $/EURO exchange rate? c. Given your answers to parts (a) and (b), and given that the current interest rate in the US is 10%, what would you expect current French interest rates to be?

Reference no: EM131091360

Questions Cloud

Manufacturing has linear short run production function : ACME manufacturing has the linear short run production function Q = 13K + 2L + 41M, where K is capital, L is labor and M is raw materials. Its stock of capital and raw materials are fixed at 5 units each; input prices were $8 for capital and $16 for ..

Purpose does the psychological models serve : In your opinion what purpose does the psychological models serve? Explain in your own words. Free association is a therapeutic technique of psychoanalytic model while Rational Emotive Behavior Therapy (REBT) is a cognitive behavioral technique, exp..

Net gain from trade for country in opening up to free trade : Suppose in the market for oranges in a small country closed to international trade, the domestic price is $3 per lb. at which 10,000 lbs. are bought and sold in the country, while the world price is $4 per lb. If the country opens up to free trade wi..

Draw a graph representing a hypothetical economy : Carefully label the two axes, the 45-degree line, the AE curve, and the equilibrium level of real GDP. Indicate and label the GDP gap and the recessionary gap.

Euro spot exchange rate-euro exchange rate : Two countries, France and the US produce just one good – chicken. Suppose that the price of beef in the US is $2.80 per kilogram, and in France it is 3.70 EURO per kilogram. According to PPP theory, what should be the $/EURO spot exchange rate? What..

Understanding of the mechanics of solar systems : I a strong theoretical understanding of the mechanics of solar systems, particularly in the field of Heat Transfer. I designed and manufactured components, such as heat exchanger, manifold and storage tank

Level of ethical interpersonal communication : How would you assess the level of ethical interpersonal communication in an organization at which you are or were employed? Give some concrete examples that serve as the basis of your assessment.

Lucy entered into the following transactions : In 2000, Lucy borrowed $600,000 from her brother, Irwin, so that Lucy could start a business. The loan was on open account, and no interest or due date was provided for. Under applicable state law, collection on the loan was barred by the statute ..

What are some ethical considerations : What are some ethical considerations when using slack and buffers?

User Account

All Pages