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These practice problems are associated with the “Day 1 – getting your feet wet” notes
1.
The exchange rate at the start of the year was $1.3600/€.
Now the exchange rate is
$1.4500/€.
Compute the percentage change in the value of the euro over this time
period.
(hint:
your answer should show an appreciation in the euro)
ANS:
6.62% appreciation
2.
Suppose the exchange rate at the start of the year was $1.8800/£.
Since the state of the
year, the pound has depreciated 7%.
What is today’s exchange rate?
(hint:
this is the
same as asking if a $25 stock falls 7% in price, what is the new price?)
ANS:
$1.7484/£
3.
Given the information in Q2, and your solution to Q2, what has been the rate of
appreciation in the dollar ($) over this same time period?
(hint:
you need to take
inverses and use the £ values of $1 at the two points in time)
ANS:
7.53% appreciation
4.
Given the information in Q2 and Q3, how much has the cost of importing a £100 good
decreased from the start of the year to now?
(hint:
determine the $ cost of the £100
good at the start of the year and compare it to the $ cost of the good now)
ANS:
in absolute terms, the cost has decreased $13.16
ANS: in percentage terms, the cost has decreased 7.00%
5.
Suppose the exchange rate at the start of the year was $1.8026/£.
Since the state of the
year, the dollar has depreciated 7%.
What is today’s exchange rate?
(hint:
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 Spring '12
 Scott
 Exchange Rate

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