An international corporation located in Country A is considering a project in the United States. The currency in Country A, say X, has been strengthening relative to the U.S. dollar; specifically, the average devaluation of the U.S. dollar has been 2.82.8% per year (which is projected to continue). Assume the present exchange rate is 6.96.9 units of X per U.S. dollar. a. What is the estimated exchange rate two years from now? b. If, instead, currency X was devaluing at the same rate (2.82.8% per year) relative to the U.S. dollar, what would be the exchange rate three years from now?
An international corporation located in Country A is considering a project in the United States. The currency in Country A, say X, has been strengthening relative to the U.S. dollar; specifically, the average devaluation of the U.S. dollar has been 2.82.8% per year (which is projected to continue). Assume the present exchange rate is 6.96.9 units of X per U.S. dollar. a. What is the estimated exchange rate two years from now? b. If, instead, currency X was devaluing at the same rate (2.82.8% per year) relative to the U.S. dollar, what would be the exchange rate three years from now?
Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
14th Edition
ISBN:9781305506381
Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Chapter6: Managing In The Global Economy
Section: Chapter Questions
Problem 12E
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An international corporation located in Country A is considering a project in the United States. The currency in Country
A,
say
X,
has been strengthening relative to the U.S. dollar; specifically, the average devaluation of the U.S. dollar has been
2.82.8%
per year (which is projected to continue). Assume the present exchange rate is
6.96.9
units of X per U.S. dollar.a. What is the estimated exchange rate two years from now?
b. If, instead, currency X was devaluing at the same rate
(2.82.8%
per year) relative to the U.S. dollar, what would be the exchange rate three years from now?Expert Solution
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