If the Spot Rate for Jupiter Ringlets (JPR)is 3 USD

question 9

Multiple Choice

If the spot rate for Jupiter Ringlets (JPR) is 3 USD per Ringlet and the risk-free rates of return are 1% and 2%,respectively for the Jupiter and U.S.economy,then what should the 1-year forward rate be for JPR/USD? Round to the nearest 4th decimal place.

• A) 3.0297
• B) 3.0000
• C) .3301
• D) none of the above

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Definitions:

Imperfectly Elastic

Describes a demand curve that does react to price changes, but not in a perfect one-to-one relationship, indicating some sensitivity to price changes but not to an infinite degree.

Substitute

A good or service that can be used in place of another to satisfy similar needs or desires.

Economic Rent

The excess payment made to a factor of production over what is necessary to keep it in its current use, reflecting payment beyond its opportunity cost.

Equilibrium Wage

The wage rate at which the quantity of labor supplied equals the quantity of labor demanded in the market.