Assume That an Item Costs $100 in the U

question 55

Multiple Choice

Assume that an item costs $100 in the U.S. and the exchange rate between the U.S. and Canada is: $1 = C$1.27. Which one of the following concepts supports the idea that the item that sells for $100 in the U.S. is currently selling in Canada for $127?

• A) Unbiased forward rates condition
• B) Uncovered interest rate parity
• C) International fisher effect
• D) Purchasing power parity
• E) Interest rate parity