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International Financial Management 2nd Edition by Geert Bekaert ,Robert Hodrick
Edition 2ISBN: 978-0132162760International Financial Management 2nd Edition by Geert Bekaert ,Robert Hodrick
Edition 2ISBN: 978-0132162760 Exercise 7
Suppose that the price level in Canada is CAD16,600, the price level in France is EUR11,750, and the spot exchange rate is CAD1.35/EUR.
a. What is the internal purchasing power of the Canadian dollar
b. What is the internal purchasing power of the euro in France
c. What is the implied exchange rate of CAD EUR that satisfies absolute PPP
d. Is the euro overvalued or undervalued relative to the Canadian dollar
e. What amount of appreciation or depreciation of the euro would be required to return the actual exchange rate to its PPP value
a. What is the internal purchasing power of the Canadian dollar
b. What is the internal purchasing power of the euro in France
c. What is the implied exchange rate of CAD EUR that satisfies absolute PPP
d. Is the euro overvalued or undervalued relative to the Canadian dollar
e. What amount of appreciation or depreciation of the euro would be required to return the actual exchange rate to its PPP value
Explanation
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Given information:
a.
Internal purchas...
International Financial Management 2nd Edition by Geert Bekaert ,Robert Hodrick
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