If the Real Exchange Rate Is 5/4 Pounds of Chilean

question 73

Multiple Choice

If the real exchange rate is 5/4 pounds of Chilean beef per pound of U.S.beef,a pound of U.S.beef costs $2 and the nominal exchange rate is 500 Chilean pesos per dollar,then Chilean beef costs

• A)1,250 pesos per pound.
• B)800 pesos per pound
• C)250 pesos per pound.
• D)None of the above is correct.

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Definitions:

Expected Rate of Return

The anticipated return on an investment, taking into account the probability of different possible returns.

Perfectly Negatively Correlated

A relationship between two variables in which one variable increases as the other decreases with a correlation coefficient of -1.

Risk-free Portfolio

A portfolio consisting of investments that are considered to have zero risk, often associated with government securities.

Standard Deviation

A statistical measure of the dispersion or variability of a set of values, indicating how much the values differ from the mean.