Harmony is a South African mining company that exports 24 ounces of gold to the US. Gold is priced in US dollars but Harmony's workers are paid in rand (the currency of South Africa). The current price of gold is 1,798 dollars per ounce. The current exchange rate is 18.48 rand (R) per $1. Harmony's current mining costs are R14,000 per ounce. Expected one-year inflation rates are 2 in the U.S. and 5 in South Africa (in%). If the exchange rate in one year is consistent with PPP, what is the gold price that would maintain Harmony's profits constant in real terms? Enter your answer with no decimals (so enter 9.8 as 10)

Harmony is a South African mining company that exports 24 ounces of gold to the US. Gold is priced in US dollars but Harmony's workers are paid in rand (the currency of South Africa). The current price of gold is 1,798 dollars per ounce. The current exchange rate is 18.48 rand (R) per $1. Harmony's current mining costs are R14,000 per ounce. Expected one-year inflation rates are 2 in the U.S. and 5 in South Africa (in%). If the exchange rate in one year is consistent with PPP, what is the gold price that would maintain Harmony's profits constant in real terms? Enter your answer with no decimals (so enter 9.8 as 10)

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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