If the Exchange Rate Between the Canadian Dollar and the American

question 50

Essay

If the exchange rate between the Canadian dollar and the American dollar was fixed at 1.30 Canadian dollars per U.S.dollar and investors perceived Canadian bonds to be equal in risk to U.S.bonds, if the U.S.bonds are selling for $1,000 and have a 5 percent interest rate, assuming capital flows freely between the two countries what will be the price and the interest rate of the Canadian bonds?

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Definitions:

Relative Price Changes

Variations in the price of one good or service in relation to the prices of other goods and services.

Executable Code

Computer code that can be run by the computer's processor to perform specific operations or tasks.

Task

"It holds the information necessary to schedule the program’s execution and sets the execution priority for one or more programs."

Logic

A process of solving complex problems through the repeated use of simple functions that can be either true or false. The three basic logic functions are AND, OR, and NOT.