A South American country has had a high rate of inflation. Recently, its exchange rate was 15 lunas per dollar. It is likely that the country will continue to experience a 25% inflation rate and that the US will continue at a 3% inflation rate. Assume that the exchange rate will vary the same as the inflation. In this situation, one dollar will buy how many lunas FIVE years from now? 39.40 lunas 30.14 lunas 45.78 lunas $42.56 lunas

A South American country has had a high rate of inflation. Recently, its exchange rate was 15 lunas per dollar. It is likely that the country will continue to experience a 25% inflation rate and that the US will continue at a 3% inflation rate. Assume that the exchange rate will vary the same as the inflation. In this situation, one dollar will buy how many lunas FIVE years from now? 39.40 lunas 30.14 lunas 45.78 lunas $42.56 lunas

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

In a recent e-news, you observe that the 6-month forward rate is $1.5031/ Euro. Further, if you invest the dollar, it fetches you interest at the rate of 2% p.a. In comparison, the interest rate in Eurozone is 1% p.a. You also see that CAD 1.5513 are needed to purchase a Euro and CAD1.332 are needed to buy a US$. Is it possible for you to make an arbitrag profit? If so, which of the arbitrage strategies will you employ and what will be the profit? Assume that interest rate parity holds, and you have one million dollars available to conduct arbitrage. Please show all necessary workings and explanation.
Please show all work: Suppose the current $/B₤ exchange rate is $1.56/₤. The inflation rate in the U.S. is projected to be 4.6% for the year, while it is expected to be 3.2% in the U.K. Right now, a consumer can be the same car in the U.S. for $26,000 that costs ₤16,667 in England. What is the project cost of the car in the U.S. and U.K. by the end of the year? What change in the exchange rate is projected by PPP? Demonstrate that the two cars will cost the same at the end of the year if PPP holds.
Hello, how does the formula represented in my first image get to the solution form in the second image? I guess its the algebra portion of the problem which I do not quite understand. Also, why in the solution we multiply times 1/1.1 and then add it? The longer your explanation through the solution the better for me, thanks.
Today's spot rate of the Mexican peso os $0.10. Assume that purchasing power parity holds. The U.S. inflation rate over this year is expected to be 7 percent, whereas the Mexican inflation over this year is expected to be 3 percent. What will be the new value of the Mexican peso after it adjust to the inflationary changes? a. b. C. d. $0.10388 $0.15543 $0.17566 $0.37565
Janice is a U.S. citizen traveling to Mexico with $5,000. She should be exchange her dollars for ____ pesos at an exchange rate of U.S. dollars to Mexican pesos of 0.06. (Note: Round to the nearest one in foreign currency.) a) 52,457 Ob) 91,760 O c) 83,333 d) 74,242 Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.
You work for the Bureau of Economic Analysis (BEA) of the U.S. Department of Commerce. Your supervisor gives you the following U.S. International Transactions Accounts for the Year 20XX (figures are in billions of dollars) and wants it reported in a coherent fashion in accordance with accepted conventions: Investment income payments (27.3); Export of goods 80.6; Balance of services 5.1; Capital outflow (44.5); Imports of goods (110.9); Change in Official Reserves 2; Investment income receipts 24.7; Capital inflow 73.6; Net unilateral transfers (3.3). (a) He wants you to compute the balances of trade, current account, capital account and statistical discrepancy. (b) He also wants you to find out (based on your calculation) if the U.S. is a net debtor or a net creditor and why
A foreign exchange trader with a U.S. bank took a speculative long position of £6,000,000 when the GBP/USD was 1.3233. Subsequently, the exchange rate has changed to 1.3342. If the position is closed now, what is the profit/loss arising from that trade? (USD, no cents)
This question relates to the following news article New Zealand dollar drops to lowest value against US dollar since 2020 (27/09/2022) The New Zealand dollar has dropped to its lowest value against its US equivalent since March 2020. The bad news for Kiwis is that it means it'll take longer for consumer price inflation to fall. ...a weak Kiwi dollar means importing is more expensive. "While we do expect inflation rates to slowly fall from here, the longer the New Zealand dollar remains low. the slower it will take for those inflation rates to fall." ASB senior economist Mark Smith said. Six months ago the New Zealand dollar was US68.9c - now it's at US56.6c, a fall of 18 percent. Aotearoa's dollar is suffering because the US dollar is being pumped up by the US Federal Reserve lifting interest rates to tackle inflation. "interest rates globally are going up, and when rates are going up, generally people tend to look to where their money will be safest, and at the moment it's certainly…
Assume that JA$ 1.00 = GUY $ 2.00. In each scenario below you are asked to find the new value of the Jamaican Dollar (JMD). You will always start a new calculation using the original exchange rate given above. Further, you are required to arrive at a possible explanation for each change and illustrate same on a diagram of the market for Jamaican Dollars. (a) The JMD depreciates by 1%. (b) The JMD depreciates by 3% (c) The JMD appreciates by 2%. (d) The JMD appreciates by 4%.
Suppose the GDP of Honduras is 100,000 lempiras and the exchange rate between Honduran currency lempiras and USD is 20 lempira=$1. What is the GDP of Honduras when measured in USD?
If prices grew at a compound growth rate of 5% per annum in the United States and 0.08% per annum in Japan for the past eight years, what exchange rate represents PPP today if the two currencies, eight years ago, were in parity and exchanged at a rate of JPY 109/USD? JPY 207.3/USD JPY 209.9/USD JPY 74.2/USD JPY 73.3/USD
Relative inflation rates affect interest rates, exchange rates, the overall economic health of a country, and the operations and profitability of multinational companies. Consider the following statement: Countries with lower inflation rates will have lower interest rates. If companies borrow from countries with low interest rates, the potential gains from the interest savings will likely be (multiplied or offset) by the losses from currency appreciation.