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    US and Canada Spot and Forex Rates

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    The spot exchange rate for the Canadian dollar is Can $1.26 and the 6month forward rate is Can $1.22.

    Which is worth more, the U.S. Dollar, or the Canadian Dollar?

    Assuming absolute PPP holds, what is the cost in the U.S. of an Elkhead Beer if the price in Canada is Can $2.19? Why might the beer actually sell at a different price in the U.S.?

    Is the US dollar selling at a premium or a discount relative to the Canadian dollar?

    Which currency is expected to appreciate in value?

    Which country do you think has higher interest rates? Explain?

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    Solution Preview

    The spot exchange rate for the Canadian dollar is Can$1.26 and the 6month forward rate is Can$1.22. Which is worth more, the U.S. Dollar, or the Canadian Dollar?

    Since one US$ is equal to Can$1.26, we get more of Canadian dollar per US dollar, US dollar is worth more and Canadian Dollar is worth less.

    Assuming absolute PPP holds, what is the cost in the U.S. of an Elkhead Beer if the price in Canada is ...

    Solution Summary

    The solution examines United States and Canada Spot and Forex rates. The appreciation and depreciation value of currency is determined.

    $2.19

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