Towson University International Finance Discussion

Description

1. Suppose that the price level in Canada is CAD 16, 600. The price level in France is EUR 11,750, and the spot exchange is CAD 1.35/EURO

What is Internal PPP, What is external PPP, Implied exchange rate, determine overvaluation or undervaluation, and finally, find the prediction percentage of appreciation or depreciation.

2. Suppose that you’re trying to decide between two jobs offers. One consulting firm offers you $ 150,000 per year to work out of its New York office. A second consulting firm wants you to work out of its London office and offers you 100,000 euro per year. The current exchange rate is $ 1.65/euro which offer should you take and why? Assume that PPP exchange rate is $ 1.40/euro and that you are indifferent between working in the two cities if the purchasing power of your salary is the same.

Deciding between two jobs in New York and London

Which offer is making you better off?

Please include the references