4. Before 12th August 2005, the US Dollar (USD) was trading at 8.20 Renminbi yuan per dollar (RMB, China’s official currency) in the financial market of China. After that date, the USD was trading at only 7.50 RMB yuan per dollar in China. (1) If you received $100 US dollars from your friend in New York in July 2005, hold it for half a year and finally exchange it for RMB in Chengdu in late January 2006, how much value in RMB would you lose? (2) What is the percentage change in the US Dollar’s value?

Exchange rate is a relative price of one currency expressed in terms of another currency. In this…

Answered: 4. Before 12th August 2005, the US…

Macroeconomics: Private and Public Choice (MindTap Course List)

16th Edition

ISBN:9781305506756

Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Chapter19: International Finance And The Foreign Exchange Market

Section: Chapter Questions

Problem 4CQ

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4. Before 12^th August 2005, the US Dollar (USD) was trading at 8.20 Renminbi yuan per dollar (RMB, China’s official currency) in the financial market of China. After that date, the USD was trading at only 7.50 RMB yuan per dollar in China.

(1) If you received $100 US dollars from your friend in New York in July 2005, hold it for half a year and finally exchange it for RMB in Chengdu in late January 2006, how much value in RMB would you lose?

(2) What is the percentage change in the US Dollar’s value?

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