b . Assuming absolute PPP holds , what is the cost in the United States of an Elkhead beer if the price in Canada is Can $ 2.50 ? Why might the beer actually sell at a different price in the United States ?
c . Is the U . S . dollar selling at a premium or a discount relative to the Canadian dollar ?
d . Which currency is expected to appreciate in value ?
e . Which country do you think has higher interest rates — the United States or Canada ? Explain
7 . Interest Rates and Arbitrage [ LO2 ] The treasurer of a major U . S . firm has $ 30 million to invest for three months . The interest rate in the United States is . 31 percent per month . The interest rate in Great Britain is . 34 percent per month . The spot exchange rate is £. 573 , and the three-month forward rate is £. 575 . Ignoring transaction costs , in which country would the treasurer want to invest the company ’ s funds ? Why ?
Ch . 26 : Questions 1 & 2 ( Questions and Problems section ): Microsoft ® Excel ® template provided for Problem 2
1 . Calculating Synergy [ LO3 ] Pearl , Inc ., has offered $ 357 million cash for all of the common stock in Jam Corporation . Based on recent market information , Jam is worth $ 319 million as an independent operation . If the merger makes economic sense for Pearl , what is the minimum estimated value of the synergistic benefits from the merger ?
2 . Balance Sheets for Mergers [ LO2 ] Consider the following premerger information about Firm X and Firm Y :