Suppose that the following situation exists in the foreign exchange market. 1 Canadian dollar buys 5.77 South African rand. If the price of a bottle of South African wine is 32 rand, what is the price in Canadian dollars if purchase power parity exists?
A)$184.64
B)$32.00
C)$5.55
D)$18.46
E)$18.02

Question

Quizplus · Accepted Answer

To find the price in Canadian dollars, divide the price in rand by the exchange rate: 32 rand / 5.77 rand per Canadian dollar = 5.55 Canadian dollars.

Suppose That the Following Situation Exists in the Foreign Exchange