Wednesday
May 27, 2015

Homework Help: finance

Posted by Sara on Thursday, May 5, 2011 at 8:13pm.

Assume that the export price of a Nissan XTerra from Osaka, Japan is 3,750,000. The exchange rate is 121.84/$. The forecast rate of inflation in the United States is 2.8% per year and is 0.6% in Japan.
a. What is the export price of the XTerra at the beginning of the year expressed in US dollars?
b. Assuming purchasing power parity holds, what should the exchange rate be at the end of the year?
c. Assuming 100% pass-thru of exchange rate changes, what should be the dollar price of an XTerra at the end of the year?
d. Assuming 75% pass-thru of exchange rate changes, what should be the dollar price of an XTerra at the end of the year?

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