question archive 1) A bottle of German wine costs $21 euros in Berlin
1) A bottle of German wine costs $21 euros in Berlin
Subject:FinancePrice:2.87 Bought7
1) A bottle of German wine costs $21 euros in Berlin. According to the purchasing power parity theory, what would the bottle sell for in New York if it costs the New York company $1.25 per bottle to transport the wine to the United States? Assume the exchange rate is $1.32 per euro.
Select one:
a. $27.22
b. $39.50
c. $40.54
d. $28.97
2.) All of the following are examples of sources of discretionary financing EXCEPT
Select one:
a. trade credit.
b. common stock.
c. bank loans.
d. notes payable.
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Answer:
1. D
1 euro = 1.32 dollars
If PPP holds then 21 euros = 27.72 dollars
Add the transportation cost of 1.25 dollar, the bottle of wine would cost 28.97 dollars
2. A.
Discretionary financing includes long-term debt, notes payable and common stock accounts. It does not vary directly with sales ofthe company.
