Suppose the spot exchange rate for the Canadian dollar is Can$1.03 and the six-m

Question

Suppose the spot exchange rate for the Canadian dollar is Can$1.03 and the six-month forward rate is Can$1.01.

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

Assuming absolute PPP holds, what is the cost in the United States of an Elkhead beer if the price in Canada is Can$2.44? (Enter your answer as directed, but do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)

Suppose the spot exchange rate for the Canadian dollar is Can$1.03 and the six-month forward rate is Can$1.01.

Explanation / Answer

a) A CAN Dollar Worth more as its value is appreciating.

b) Cost in US Dollar = 2.44 / 1.03 = $2.37

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