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Ch02_SSol

# Ch02_SSol - Problem 2.2 Peso exchange rate change In...

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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.

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Problem 2.10 Saudi import Assumptions Values € 375,000 0.8700 Spot rate of exchange, Jordanian dinar per dollar (JD/\$) 0.7080
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