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  3. other things equal, and assuming efficient markets

Other things equal, and assuming efficient markets, if a Honda Accord costs $18,365 in the...

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Accounting

Other things equal, and assuming efficient markets, if a Honda Accord costs $18,365 in the U.S. then at an exchange rate of $1.43/, the Honda Accord should cost _____________ in Great Britain.

(a) 0.0779

(b) 0.0679

(c) 12,843

(d) 10,843

(e) none of the above

One year ago the spot rate of U.S. dollars for Canadian dollars was $1/C$1. Since that time the rates of inflation in the U.S. and Canada have been 6% and 2% respectively. Based on the theory of Relative PPP, the current spot exchange rate of U.S. dollars for Canadian dollars should be approximately _______________.

(a) $1.04/C$1

(b) C$1.04/$1

(c) $1/C$1

(d) $0.96/C$1

(e) none of the above

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