CH1 - These practice problems are associated with the Day 1...

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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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CH1 - These practice problems are associated with the Day 1...

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