Apple is selling 30,000 units in Europe at an average price of €1,500 per unit. Both the spot and forward exchange rates are $1.20/€. The cost of each unit in dollars is $1,300 per unit. The elasticity of demand for Apple computers in Europe is € = 1.5. Now consider a depreciation of Euro (relative to US dollar) from $1.20/€ to $1.08/€ and assume zero passthrough. What is Apple's exposure? a. $45 million b. $20 million c. €45 million d. €20 million

Apple is selling 30,000 units in Europe at an average price of €1,500 per unit. Both the spot and forward exchange rates are $1.20/€. The cost of each unit in dollars is $1,300 per unit. The elasticity of demand for Apple computers in Europe is € = 1.5. Now consider a depreciation of Euro (relative to US dollar) from $1.20/€ to $1.08/€ and assume zero passthrough. What is Apple's exposure? a. $45 million b. $20 million c. €45 million d. €20 million

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Manshukh
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Assume that the export price of a Toyota Camry from Osaka, Japan is ¥3,567,020. The exchange rate is ¥138 $1.00. The forecast rate of inflation in the United States is 4.0% per year, and in Japan it is 0.0% per year. Assuming 70% exchange rate pass-through, what will be the dollar price of a Camry at the end of the year? $27.320 $27,045 O $26,571 O $36,094
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1

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