Task 1: Analyze the following and discussion your answers:
(1) Assume the price of a shirt in Florida is USD20 and in Ottawa is CAD25. The exchange rate between USD and CAD is .80. Calculate the effects of an appreciation and a depreciation in the exchange rate on the price of the shirt in US and Canada; and the likely effects on the demand in both countries. Please show all work.
(2) for a company sourcing key inputs in a foreign country, describe the effects of an appreciation and a depreciation in the exchange rate on its input prices and the likely effects on the company's cost of production
Task 2: Using illustrative data show effects of hedged versus non-hedged exchange rate changes on a company's profitability.