{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

Solutiosn.problems.Chp2

# Solutiosn.problems.Chp2 - Problem 2.1 Amsterdam and New...

This preview shows pages 1–6. Sign up to view the full content.

Problem 2.1 Amsterdam and New York Assumptions Values Buy a US dollar in Amsterdam for (€/\$) 0.8200 Which is equivalent, the reciprocal (\$/€) \$1.2195 Buy a euro in NY for (\$/€) \$1.2200 Which is equivalent, the reciprocal (€/\$) 0.8197 In Amsterdam, one can buy a U.S. dollar for €0.8200. In New York, one can buy a euro for \$1.22. What is the foreign exchange rate between the dollar and the euro?

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
Problem 2.2 Peso exchange rate change Calculation of Percentage Change in Value Values Initial exchange rate (peso/\$) 3.20 Devalued exchange rate (peso/\$) 5.50 Percentage change in peso value -41.82% (beginning rate - ending rate) / (ending rate) In December 1994 the government of Mexico officially changed the value of the Mexican peso from 3.2 pesos per dollar to 5.5 pesos per dollar. Was this a depreciation, devaluation, appreciation, or revaluation? Explain. Anytime a government sets or resets the value of its currency, it is a managed or fixed exchange rate. If that is the case, any change in its official value must be either a "revaluation" or "devaluation." In this case, a devaluation. This is evident from the fact that it now takes more pesos per U.S. dollar, so its value is less or devalued. In terms of the percentage change calculation, this is indicated by the negative percentage change.
Problem 2.3 Good as gold Gold Standard Assumptions Values What If Price of an ounce of gold in US dollars (\$/oz) \$20.67 \$38.00 Price of an ounce of gold in British pounds (₤/oz) £4.2474 £4.2474 What is the implied \$/₤ exchange rate? \$4.8665 \$8.9466 (dollar price of an ounce / pound price of an ounce) Under the gold standard, the price of an ounce of gold in U.S. dollars was \$20.67, while the price of that same ounce in British pounds was £ 4.2474. What would the exchange rate between the dollar and the pound be if the U.S. dollar price had been \$38.00 per ounce?

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
Problem 2.4 Gold standard Assumptions Values Price of an ounce of gold in US dollars (\$/oz) \$20.67 Price of an ounce of gold in French francs (FF/oz) 310.00 What is the implied French franc/US dollar exchange rate? 15.00 (French franc price of an ounce / US dollar price of an ounce) …. Or if expressed as \$/FF \$0.0667 Before World War I, \$20.67 was needed to buy one ounce of gold. If, at the same time one ounce of gold could be purchased in France for FF310.00, what was the exchange rate between French francs and U.S. dollars?
Spot rate -- customer Assumptions Values Spot rate on Mexican peso (pesos/US\$) 10.8000 Your company buys this amount of pesos 180,000.00 What is the cost in US\$? \$16,666.67 (the peso amount divided by the spot exchange rate) Spot transactions are settled in two business days, so in this case, Wednesday. The spot rate for Mexican pesos is Ps10.80/\$. If your company buys Ps180,000

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

### Page1 / 13

Solutiosn.problems.Chp2 - Problem 2.1 Amsterdam and New...

This preview shows document pages 1 - 6. Sign up to view the full document.

View Full Document
Ask a homework question - tutors are online