Using spot and forward exchange rates

Assignment Help Financial Management

Reference no: EM131917898

Using Spot and Forward Exchange Rates

Suppose the spot exchange rate for the Canadian dollar is Can$1.08 and the six-month forward rate is Can$1.10.

a. Which is worth more, a U.S. dollar or a Canadian dollar?

Canadian dollar

U.S. dollar

b. Assuming absolute PPP holds, what is the cost in the United States of an Elkhead beer if the price in Canada is Can$3.09? (Enter your answer as directed, but do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)

Cost in U.S. dollars $

c. Is the U.S. dollar selling at a premium or a discount relative to the Canadian dollar?

premium

discount

d. Which currency is expected to appreciate in value?

Canadian dollar

U.S. dollar

e. Which country do you think has higher interest rates—the United States or Canada?

Canada

the United States

Reference no: EM131917898

Questions Cloud

Exchange rates and arbitrage : The 180-day forward rate on the Norwegian krone would have to be Kr/$ to prevent arbitrage.

Forecast for the next year sales using naive approach : What would be the forecast for the next year's sales using the naive approach?

Used to discount the stream of cash flows : Use the information provided at the bottom of the sheet to calculate the cost of capital of XYZ Corporation to be used to discount the stream of cash flows.

Spot versus forward rates : Suppose the spot and three-month forward rates for the yen are ¥79.80 and ¥79.12, respectively.

Using spot and forward exchange rates : Which is worth more, a U.S. dollar or a Canadian dollar? Which currency is expected to appreciate in value?

What rate of return would they be? earning : what return they would be making on their investment of ?$15,854.02. What rate of return would they be? earning?

Some of the common misconceptions about cash flow : What are some things that the statement of cash flows does not show? And what are some of the common misconceptions about cash flow?

Evaluating proposed expansion of existing subsidiary : You are evaluating a proposed expansion of an existing subsidiary located in Switzerland.

How much must you deposit each year to obtain your goal : If the bank is willing to pay 12 percent compounded annually, how much must you deposit each year to obtain your goal?

User Account

All Pages