While Shopping in the Mexican Market,you Find That Limes Cost

question 29

Multiple Choice

While shopping in the Mexican market,you find that limes cost 12 pesos each.You remember that back home they cost 60 cents each.If the Purchasing Power Parity Theory holds,the rate of exchange is:

• A) 20 pesos/dollar or 5 cents/peso.
• B) 80 pesos/dollar or 1.25 cents/peso.
• C) 5 pesos/dollar or 20 cents/peso.
• D) 1 peso/dollar or 15 cents/peso.

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Definitions:

Compounded Monthly

A method of calculating interest where the accrued interest is added to the principal each month before the next interest calculation.

Compounded Quarterly

The technique of determining interest by taking into account the original principal sum and the interest that has accrued in earlier cycles, with this process being carried out every three months.

Compounded Semi-Annually

Interest on an investment is calculated and added to the principal every six months, with future interest then calculated on the new total.

Fair Market Value

The price at which an asset would change hands between a willing buyer and a willing seller, both having reasonable knowledge of all the relevant facts.