This is for a study guide (not for a grade) please do not decline questionUsing graph below An American company contracts a Japanese architect to design a new building in Seattle for 8,075,000 dollars. How much (in Yen) would it cost the American firm in month 1? Month 2? So in which month would the American company prefer to pay off the contract? Explain your answer using the numbers from the chart above (show your math).Japan Airlines is interested in purchasing new commercial aircraft from US manufacturer Boeing at a price of $102 million per plane. What is the difference in the yen price between month 1 and month 2? During which month is Japan Airlines more likely to buy more planes? Why? Explain your answer using the numbers from the chart above (show your math). ### Exchange Rate Table for Month 1#### Currency Exchange Rates:- **US Dollar ($1 =):** - British Pound: 1.32 - Chinese Yuan: 6.32 - Japanese Yen: 113.04 - Euro: 0.89 - **British Pound (£1 =):** - US Dollar: 0.76 - Chinese Yuan: 8.46 - Japanese Yen: 149.55 - Euro: 1.17 - **Chinese Yuan (¥1 =):** - US Dollar: 0.16 - British Pound: 0.12 - Japanese Yen: 17.75 - Euro: 0.14 - **Japanese Yen (¥1 =):** - US Dollar: 0.0088 - British Pound: 0.0067 - Chinese Yuan: 0.056 - Euro: 0.0078 - **Euro (€1 =):** - US Dollar: 1.13 - British Pound: 0.85 - Chinese Yuan: 7.21 - Japanese Yen: 127.55### Exchange Rate Table for Month 2#### Currency Exchange Rates:- **US Dollar ($1 =):** - British Pound: 1.40 - Chinese Yuan: 6.20 - Japanese Yen: 116.24 - Euro: 0.92 - **British Pound (£1 =):** - US Dollar: 0.70 - Chinese Yuan: 8.72 - Japanese Yen: 146.89 - Euro: 1.11 - **Chinese Yuan (¥1 =):** - US Dollar: 0.20 - British Pound: 0.11 - Japanese Yen: 16.32 - Euro: 0.15 - **Japanese Yen (¥1 =):** - US Dollar: 0.0080 - British Pound: 0.0065 - Chinese Yuan: 0.062 - Euro: 0.0078 - **Euro (€1 =):** - US Dollar: 1.17 - British Pound: 0.89 -

The exchange rate can be expressed in 2 ways: A) Price of domestic currency in terms of foreign currency : Here if the exchange rate rises => appreciation of domestic currency B) Price of foreign currency in terms of domestic currency : Here if the exchange rate rises => depreciation of domestic currencyPart A # American company contracts a Japanese architect to design a new building in Seattle for 8,075,000 dollars. # Price of $1 in terms of Japanese Yen in the month 1 = (1/0.0088) = 114 Japanese Yen # Hence in the first month American company have to pay 8,075,000*114 = 920,550,000 Japanese Yen # Price of $1 in terms of Japanese Yen in the month 2 = (1/0.0080) = 125 Japanese Yen # Hence in the second month American company have to pay 8,075,000*125 = 1,009,375,000 Japanese Yen # Comparing the payment in terms of Japanese Yen, the American company will have to pay less number of Japanese Yen in month1 compared to month2, hence they should pay off the contract in month1. Part B #Japan Airlines is interested in purchasing new commercial aircraft from US manufacturer Boeing at a price of $102 million per plane # Price of $1 in terms of Japanese Yen in the month 1 = (1/0.0088) = 114 Japanese Yen # Hence in the first month Japanese company have to pay 102,000,000*114 = 11,628,000,000 Japanese Yen # Price of $1 in terms of Japanese Yen in the month 2 = (1/0.0080) = 125 Japanese Yen # Hence in the second month Japanese company have to pay 102,000,000*125 = 12,750,000,000 Japanese Yen # Comparing the payment in terms of Japanese Yen, the Japanese company will have to pay less number of Japanese Yen in month1 compared to month2, hence they should buy more planes in month1.