The Beginning-Of-The-Year Prices for a Pair of Boots Are $50

question 48

Multiple Choice

The beginning-of-the-year prices for a pair of boots are $50 in the United States and ¥8,000 in Japan. We know that prices in the United States and Japan will change over the coming year due to inflation. If we assume that inflation in the United States (our home country, inf_h) will be 4% and inflation in Japan will be 3% (our foreign country, inf_f) , what will the price of the boots be at the end of the year?

• A) The U.S. boot price is $52 and we do not know the Japanese boot price.
• B) The U.S. boot price is $52 and the Japanese boot price is ¥8,240.
• C) The Japanese boot price is ¥8,240 and we do not know the U.S. boot price.
• D) We cannot determine either boot price.

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Definitions:

Lockbox System

A service offered by banks to companies for the receipt of payment from customers, involving the collection and processing of cheque payments at a secure location.

Collection Time

The average period a company takes to collect payments owed by its customers.

Lockbox Fee

A charge by banks for the service of collecting payments through a secured post office box and processing them for the account holder.

Money Market Securities

Short-term financial instruments, typically with high liquidity and very low risk, used by individuals and corporations to manage cash.