Assume that the export price of a Toyota Corolla from Osaka, Japan is ¥2,150,000. The exchange rate is ¥294/OMR. The forecast rate of inflation in the Oman is 2.2% per year and is 0.0% per year in Japan. Use this data to answer the following questions on exchange rate pass–through. a. What was the export price for the Corolla at the beginning of the year expressed in Omani Rials? b. Assuming purchasing power parity holds, what should the exchange rate be at the end of the year? c. Assuming 100% pass–through of exchange rate, what will be the dollar price of a Corolla at the end of the year?
Assume that the export price of a Toyota Corolla from Osaka, Japan is ¥2,150,000. The exchange rate is ¥294/OMR. The forecast rate of inflation in the Oman is 2.2% per year and is 0.0% per year in Japan. Use this data to answer the following questions on exchange rate pass–through. a. What was the export price for the Corolla at the beginning of the year expressed in Omani Rials? b. Assuming purchasing power parity holds, what should the exchange rate be at the end of the year? c. Assuming 100% pass–through of exchange rate, what will be the dollar price of a Corolla at the end of the year?
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter27: Multinational Financial Management
Section: Chapter Questions
Problem 10P
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16. Assume that the export price of a Toyota Corolla from Osaka, Japan is ¥2,150,000. The exchange rate is ¥294/OMR. The forecast rate of inflation in the Oman is 2.2% per year and is 0.0% per year in Japan. Use this data to answer the following questions on exchange rate pass–through.
a. What was the export price for the Corolla at the beginning of the year expressed in Omani Rials?
b. Assuming purchasing power parity holds, what should the exchange rate be at the end of the year?
c. Assuming 100% pass–through of exchange rate, what will be the dollar price of a Corolla at the end of the year?
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