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
Related questions
Question
![**Question 9 (1 point)**
You want to sell e-book readers in Serbia and can't find a price point for it, so you decide to use the iPhone index.
The price of an iPhone in Serbia (including taxes, exchange rate, inflation) is $1020.
The price of the same product in the U.S. is $820.
The price of your e-Book reader in the U.S. is $100, so for how much would you sell it in Serbia?
- Approximately $102
- (1020-820)/820+1 = 1.24. So the price in Serbia is 100*1.24=$124
- (1020-820)/1020+1 = 1.20. So the price in Serbia is 100*1.20=$120
- 1020-820=200. So the price in Serbia is $200
**Explanation:**
To determine the price of the e-book reader in Serbia using the iPhone index, calculate the ratio of the iPhone prices between Serbia and the U.S. and apply it to the U.S. price of the e-book reader.
The correct calculation uses the formula:
\[
\frac{{1020 - 820}}{1020} + 1 = 1.20
\]
Thus, the price in Serbia would be:
\[
100 \times 1.20 = 120
\]
Therefore, the correct answer is $120.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F90baae45-0133-4a45-9b52-65260b9c35d9%2Fbe6df94b-1b11-4493-8ba2-036411a4191d%2Fbbkue07_processed.png&w=3840&q=75)
Transcribed Image Text:**Question 9 (1 point)**
You want to sell e-book readers in Serbia and can't find a price point for it, so you decide to use the iPhone index.
The price of an iPhone in Serbia (including taxes, exchange rate, inflation) is $1020.
The price of the same product in the U.S. is $820.
The price of your e-Book reader in the U.S. is $100, so for how much would you sell it in Serbia?
- Approximately $102
- (1020-820)/820+1 = 1.24. So the price in Serbia is 100*1.24=$124
- (1020-820)/1020+1 = 1.20. So the price in Serbia is 100*1.20=$120
- 1020-820=200. So the price in Serbia is $200
**Explanation:**
To determine the price of the e-book reader in Serbia using the iPhone index, calculate the ratio of the iPhone prices between Serbia and the U.S. and apply it to the U.S. price of the e-book reader.
The correct calculation uses the formula:
\[
\frac{{1020 - 820}}{1020} + 1 = 1.20
\]
Thus, the price in Serbia would be:
\[
100 \times 1.20 = 120
\]
Therefore, the correct answer is $120.
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