Fundamentals of Financial Management, Concise Edition (MindTap Course List)
Fundamentals of Financial Management, Concise Edition (MindTap Course List)
9th Edition
ISBN: 9781305635937
Author: Eugene F. Brigham, Joel F. Houston
Publisher: Cengage Learning
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Chapter 17, Problem 4P
Summary Introduction

To determine: The spot exchange rate between the euro and the dollar.

Introduction:

Purchasing Power Parity:

It refers to that relationship which indicates the same cost and same kinds of products in the market of various countries after the adjustment of exchange rates of currencies. This relationship of common price can be termed as law of one price.

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A television costs $750 in the United States. The same televisioncosts 637.5 euros. If purchasing power parity holds, what is the spot exchange ratebetween the euro and the dollar?
A television costs $755 in the United States. The same television costs 634.5 euros. If purchasing power parity holds, what is the spot exchange rate between the euro and the dollar? Do not round intermediate calculations. Round your answer to four decimal places. $1 = ___  euro(s)
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