(1) The current exchange rate between the U.S. dollar and the Australian dollar is U.S. $1 = AUD$1.31. If the U.S. dollar is expected to appreciate by 5% relative to the Australian dollar, what is the new expected exchange rate?
(1) The current exchange rate between the U.S. dollar and the Australian dollar is U.S. $1 = AUD$1.31. If the U.S. dollar is expected to appreciate by 5% relative to the Australian dollar, what is the new expected exchange rate?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Answer the following questions related to the foreign exchange rate and market.
(1) The current exchange rate between the U.S. dollar and the Australian dollar is U.S.
$1 = AUD$1.31. If the U.S. dollar is expected to appreciate by 5% relative to the
Australian dollar, what is the new expected exchange rate?
(2) The Argentinean peso trades at 0.06 peso per U.S. dollar. How many Argentinean
pesos would you tip a taxi driver if you give her a $9 bill?
(3) During the 1997 Asian financial crisis, the Thai baht was trading at $0.02475 per Thai
baht. The Thai baht is trading at $0.03093 per Thai baht now. What is the percentage
change in the Thai baht's value? Would you consider it an appreciation or
depreciation?
(4) Suppose that the U.S. Federal Reserve decides to raise interest rates to combat
inflation. How will this decision affect the exchange rate between the U.S. dollar and
the
euro? Discuss with references or a practical example.
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