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In the Spot Market,$1 Is Currently Equal to A$1

question 62

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In the spot market,$1 is currently equal to A$1.4910.Assume the expected inflation rate in Australia is 3.5 percent and in the U.S.4.0 percent.What is the expected exchange rate one year from now if relative purchasing power parity exists?


Definitions:

Year

A period of 365 or 366 days, in the Gregorian Calendar, divided into 12 months, used for calculating time.

Net Operating Income

The total profit of a business after operating expenses are subtracted from gross profit but before taxes and interest are deducted.

Total Manufacturing Cost

The aggregate expense incurred in the production of goods, including direct materials, direct labor, and manufacturing overhead.

Work in Process

Inventory that represents partially completed goods which are still in the production process.

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