QUESTION 5 6.6666 A certain computer costs A$1325 in Australian and HK$9400 in H

Question

QUESTION 5 6.6666 A certain computer costs A$1325 in Australian and HK$9400 in Hong Kong. The current Australian dollar/Hong Kong dollar exchange rate is A$.16/HK$. Find the arbitrage profit (in terms of Australian dollars) per computer according to absolute PPP Round intermediate steps to four decimals and your final answer to two decimals. Do not use currency symbols or words when entering your response. QUESTION 6 6.66667 p Use the following information to answer the next two questions. Investors expect inflation rates over the next twelve months in the US and Japan to be 8% and 3%, respectively. The current exchange rates for the two currencies are as follows: C$.007N, C$1.02/ Suppose that twelve months from now, the exchange rate between US dollars and yen is $.0071M According to relative PPP, what be the impact of this new exchange rate on the US balance of trade? (Assume the US is the home country and ignore any possible feedback loop.) Round intermediate steps to four dedmals O The US BOT will increase. The US BOT will decrease. The US BOT will not be affected. Cannot be determined.

Explanation / Answer

5.

Cost of Computer in Australia = A$1,325

Cost of computer in HongKong= HK$9,400

Current Exchange rate between A$and HK$ = A$0.16 per Hk$

Cost of Hong Kong Compuer in Australian Dollar = HK$9,400 × 0.16

= A$1,504

Cost of Hong Kong Compuer in Australian Dollar is A$1,504.

Arbitrage profit = A$1,504 - A$1,325

= A$179.

An investor can earn Arbitrage profit by purchase computer in Australia and sale in Hongking and arbitrage profit is A$179.

Related Questions

Navigate

• Browse (All)
• Browse Q
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.