Suppose That the Exchange Rate Is 10 Moroccan Dirhams Per

question 51

Multiple Choice

Suppose that the exchange rate is 10 Moroccan dirhams per Canadian dollar. Also suppose that you can buy a crate of oranges for 300 dirhams in the Moroccan capital of Rabat and can buy a similar crate of oranges in Ottawa for $35. Which of the following is consistent with these facts?

• A)The real exchange rate is greater than one, and arbitrageurs could profit by buying oranges in the United States and selling them in Morocco.
• B)The real exchange rate is greater than one, and arbitrageurs could profit by buying oranges in Morocco and selling them in the United States.
• C)The real exchange rate is less than one, and arbitrageurs could profit by buying oranges in the United States and selling them in Morocco.
• D)The real exchange rate is less than one, and arbitrageurs could profit by buying oranges in Morocco and selling them in the United States.

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Definitions:

Days' Sales Uncollected

A financial metric that measures how long it takes, on average, for a company to collect cash from its credit sales.

Profit Margin

A financial metric that measures the amount of net income earned with each dollar of sales generated by comparing the profit and the revenue.

Total Asset Turnover

A financial measure that calculates the ability of a company to turn its assets into sales revenue.

Return On Total Assets

A financial ratio that measures a company's ability to generate profit from its assets.