Please Show Work!!!! Suppose the spot exchange rate for the Canadian dollar is C

Question

Please Show Work!!!!

Suppose the spot exchange rate for the Canadian dollar is Can$1.25 and the six-month forward rate is Can$1.3.

One Canadian dollar is worth U.S. $. (Do not include the dollar sign ($). Round your answer to 4 decimal places. (e.g., 32.1616))

Assuming absolute PPP holds, the cost in the United States of an Elkhead beer is U.S. $if the price in Canada is Can$2.22. (Do not include the dollar sign ($). Round your answer to 2 decimal places. (e.g., 32.16))

Please Show Work!!!!

Suppose the spot exchange rate for the Canadian dollar is Can$1.25 and the six-month forward rate is Can$1.3.

Explanation / Answer

a) 1 canadian dollar = 1/1.25 = $0.8

b) 1 can$ = .8 USD

2.22$ = .8*2.22 = $1.776

cost of Elkhead beer in USD = $1.776

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