Tom Boasts That He Is Often One of the First

question 17

Multiple Choice

Tom boasts that he is often one of the first buyers of any new technology product.Tom saw a new Apple watch at the Amsterdam airport when he was hurrying to catch a flight back home to New York.Tom saw that the watch sold for 100 Euros.Tom did not have time to buy the watch in Amsterdam.Assume that the euro/dollar exchange rate is €1 = $1.20.According to the law of one price,at what price would it make sense to buy the watch in New York?

• A)$150
• B)$140
• C)$120
• D)$125
• E)$150.

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Definitions:

Default Risk

The possibility that a borrower will fail to meet the obligations of a loan agreement.

Interest Rate Risk Premiums

Additional returns demanded by investors to compensate for the risk of fluctuating interest rates.

D Credit Rating

A rating indicating that an entity is in default, having failed to fulfill its credit obligations, the lowest possible rating in assessments of credit risk.

Credit Rating

A formal assessment of an entity's ability to repay its debts, often in the form of a letter grade.