Which currency is expected to appreciate in value

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Reference no: EM132018830

Suppose the spot exchange rate for the Canadian dollar is Can$1.12 and the six-month forward rate is Can$1.14.

a. Which is worth more, a U.S. dollar or a Canadian 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$2.85? (Round your answer to 3 decimal places, e.g., 32.161.)

Cost in U.S. dollars $

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

d. Which currency is expected to appreciate in value?

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

Reference no: EM132018830

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