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Using Exchange Rates. Take a look back at Table 18.2 to answer the following questions:
- a. If you have $100, how many Polish zlotys can you get?
- b. How much is one euro worth?
- c. If you have five million euros, how many dollars do you have?
- d. Which is worth more, a New Zealand dollar or a Singapore dollar?
- e. Which is worth more, a Mexican peso or a Chilean peso?
- f. How many Swiss francs can you get for a euro? What do you call this rate?
- g. Per unit, what is the most valuable currency of those listed? The least valuable?
a)
To find: The polish zlotys that Person X can get if he has $100
Introduction:
The price of a country’s currency that in term of the other nation’s currency is the exchange rate. The rate of exchange can be either floating or fixed. The two components of the exchange rates are the foreign currency and the domestic currency.
Answer to Problem 1QP
Person X can get Z335.98 for $100
Explanation of Solution
Given information:
The exchange rate quotations (Figure 18.2) that are stated in the Journal WS as on 28th November 2014 (Friday) is as follows:
Country U’s dollar foreign exchange rate in the late City NY trading:
| Country/currency | US$ Equivalent | US$ VS. % CHG | PER US$ |
| Friday | YTD | Friday | |
| Chile peso | 0.001642 | 15.8 | 609.1 |
| Mexico peso | 0.0718 | 6.8 | 13.9334 |
| New Zealand dollar | 0.7843 | 4.8 | 1.275 |
| Singapore dollar | 0.7667 | 3.3 | 1.3043 |
| Swiss francs | 1.0357 | 8.1 | 0.9655 |
| Euro area euro | 1.2452 | 10.4 | 0.8031 |
| Polish zlotys | 0.2976 | 11.1 | 3.3598 |
| Kuwaiti dinar | 3.429 | 3.3 | 0.2916 |
| Vietnamese dong | 0.00005 | 1.1 | 21355 |
Note: The term “chg” refers to change.
Computation of the Polish zlotys that Person X can obtain if he has $100:
From the above table, the value of a Polish zloty for a US$ on Friday is Z3.3598. The Polish zlotys that Person X can get, if he has $100 is calculated by multiplying $100 with Z3.3598.
Hence, Person X can earn Z335.98 if he has $100.
b)
To find: The worth of a euro.
Introduction:
The price of a country’s currency that in term of the other nation’s currency is the exchange rate. The rate of exchange can be either floating or fixed. The two components of the exchange rates are the foreign currency and the domestic currency.
Explanation of Solution
Given information:
The exchange rate quotations (Figure 18.2) that are stated in the Journal WS as on 28th November 2014 (Friday) is as follows:
Country U’s dollar foreign exchange rate in the late City NY trading:
| Country/currency | US$ Equivalent | US$ VS. % CHG | PER US$ |
| Friday | YTD | Friday | |
| Chile peso | 0.001642 | 15.8 | 609.1 |
| Mexico peso | 0.0718 | 6.8 | 13.9334 |
| New Zealand dollar | 0.7843 | 4.8 | 1.275 |
| Singapore dollar | 0.7667 | 3.3 | 1.3043 |
| Swiss francs | 1.0357 | 8.1 | 0.9655 |
| Euro area euro | 1.2452 | 10.4 | 0.8031 |
| Polish zlotys | 0.2976 | 11.1 | 3.3598 |
| Kuwaiti dinar | 3.429 | 3.3 | 0.2916 |
| Vietnamese dong | 0.00005 | 1.1 | 21355 |
Note: The term “chg” refers to change.
Explanation:
The worth of a euro from the above table on the specified date and day is $1.2452.
Hence, the worth of a Euro that is equivalent to US$ is $1.2452.
c)
To determine: The dollars that Person X can get if he has 5 million euros.
Introduction:
The price of a country’s currency that in term of the other nation’s currency is the exchange rate. The rate of exchange can be either floating or fixed. The two components of the exchange rates are the foreign currency and the domestic currency.
Answer to Problem 1QP
Person X can get $6,226,000 if he has 5 million euros
Explanation of Solution
Given information:
The exchange rate quotations (Figure 18.2) that are stated in the Journal WS as on 28th November 2014 (Friday) is as follows:
Country U’s dollar foreign exchange rate in the late City NY trading:
| Country/currency | US$ Equivalent | US$ VS. % CHG | PER US$ |
| Friday | YTD | Friday | |
| Chile peso | 0.001642 | 15.8 | 609.1 |
| Mexico peso | 0.0718 | 6.8 | 13.9334 |
| New Zealand dollar | 0.7843 | 4.8 | 1.275 |
| Singapore dollar | 0.7667 | 3.3 | 1.3043 |
| Swiss francs | 1.0357 | 8.1 | 0.9655 |
| Euro area euro | 1.2452 | 10.4 | 0.8031 |
| Polish zlotys | 0.2976 | 11.1 | 3.3598 |
| Kuwaiti dinar | 3.429 | 3.3 | 0.2916 |
| Vietnamese dong | 0.00005 | 1.1 | 21355 |
Note: The term “chg” refers to change.
Computation:
The dollars that can be obtained by Person X can be computed by multiplying the 5 million euros with the Country E’s euro in US$.
Hence, Person X can obtain $6,226,000.
d)
To determine: Whether the Country NZ’s dollar worth more or the Country S’s dollar worth more.
Introduction:
The price of a country’s currency that in term of the other nation’s currency is the exchange rate. The rate of exchange can be either floating or fixed. The two components of the exchange rates are the foreign currency and the domestic currency.
Explanation of Solution
Given information:
The exchange rate quotations (Figure 18.2) that are stated in the Journal WS as on 28th November 2014 (Friday) is as follows:
Country U’s dollar foreign exchange rate in the late City NY trading:
| Country/currency | US$ Equivalent | US$ VS. % CHG | PER US$ |
| Friday | YTD | Friday | |
| Chile peso | 0.001642 | 15.8 | 609.1 |
| Mexico peso | 0.0718 | 6.8 | 13.9334 |
| New Zealand dollar | 0.7843 | 4.8 | 1.275 |
| Singapore dollar | 0.7667 | 3.3 | 1.3043 |
| Swiss francs | 1.0357 | 8.1 | 0.9655 |
| Euro area euro | 1.2452 | 10.4 | 0.8031 |
| Polish zlotys | 0.2976 | 11.1 | 3.3598 |
| Kuwaiti dinar | 3.429 | 3.3 | 0.2916 |
| Vietnamese dong | 0.00005 | 1.1 | 21355 |
Note: The term “chg” refers to change.
Explanation:
From the above table, it is clear that the Country S’s dollar worth less than the Country NZ’s dollar.
1 New Zealand dollar = 0.7843 US dollar
1 Singapore dollar = 0.7667 US dollar
Hence, Country NZ’s dollar worth more than the Country S’s dollar.
e)
To determine: Whether the Country M’s peso worth more or the Country C’s peso worth more.
Introduction:
The price of a country’s currency that in term of the other nation’s currency is the exchange rate. The rate of exchange can be either floating or fixed. The two components of the exchange rates are the foreign currency and the domestic currency.
Explanation of Solution
Given information:
The exchange rate quotations (Figure 18.2) that are stated in the Journal WS as on 28th November 2014 (Friday) is as follows:
Country U’s dollar foreign exchange rate in the late City NY trading:
| Country/currency | US$ Equivalent | US$ VS. % CHG | PER US$ |
| Friday | YTD | Friday | |
| Chile peso | 0.001642 | 15.8 | 609.1 |
| Mexico peso | 0.0718 | 6.8 | 13.9334 |
| New Zealand dollar | 0.7843 | 4.8 | 1.275 |
| Singapore dollar | 0.7667 | 3.3 | 1.3043 |
| Swiss francs | 1.0357 | 8.1 | 0.9655 |
| Euro area euro | 1.2452 | 10.4 | 0.8031 |
| Polish zlotys | 0.2976 | 11.1 | 3.3598 |
| Kuwaiti dinar | 3.429 | 3.3 | 0.2916 |
| Vietnamese dong | 0.00005 | 1.1 | 21355 |
Note: The term “chg” refers to change.
Explanation:
From the above table, it is clear that the Country C’s peso worth less than the Country M’s peso.
1 Mexico peso = 0.0718 US dollar
1 Chile peso = 0.001642 US dollar
Hence, Country M’s peso worth more than the Country C’s peso.
f)
To find: The Country S’s franc that Person X can obtain for a euro and also determine this rate.
Introduction:
The price of a country’s currency that in term of the other nation’s currency is the exchange rate. The rate of exchange can be either floating or fixed. The two components of the exchange rates are the foreign currency and the domestic currency.
Answer to Problem 1QP
Person X can obtain SF 1.2022 for a euro.
Explanation of Solution
Given information:
The exchange rate quotations (Figure 18.2) that are stated in the Journal WS as on 28th November 2014 (Friday) is as follows:
Country U’s dollar foreign exchange rate in the late City NY trading:
| Country/currency | US$ Equivalent | US$ VS. % CHG | PER US$ |
| Friday | YTD | Friday | |
| Chile peso | 0.001642 | 15.8 | 609.1 |
| Mexico peso | 0.0718 | 6.8 | 13.9334 |
| New Zealand dollar | 0.7843 | 4.8 | 1.275 |
| Singapore dollar | 0.7667 | 3.3 | 1.3043 |
| Swiss francs | 1.0357 | 8.1 | 0.9655 |
| Euro area euro | 1.2452 | 10.4 | 0.8031 |
| Polish zlotys | 0.2976 | 11.1 | 3.3598 |
| Kuwaiti dinar | 3.429 | 3.3 | 0.2916 |
| Vietnamese dong | 0.00005 | 1.1 | 21355 |
Note: The term “chg” refers to change.
Computation:
The Country S’s franc that Person X can get for a euro is calculated by multiplying the Country S’s franc for a US$ with the Country E’s euro in US$.
Hence, Person X can get SF 1.2022 for a Euro.
Explanation:
The rate that is obtained by Person X is a cross-rate. The cross rate is the implicit rate of exchange between two currencies (mainly they are not the currency of Country U) that are quoted in some other third currency (generally the US$).
Hence, this is a cross-rate.
g)
To determine: The most valuable and the least valuable currency per unit.
Introduction:
The price of a country’s currency that in term of the other nation’s currency is the exchange rate. The rate of exchange can be either floating or fixed. The two components of the exchange rates are the foreign currency and the domestic currency.
Explanation of Solution
Given information:
The exchange rate quotations (Figure 18.2) that are stated in the Journal WS as on 28th November 2014 (Friday) is as follows:
Country U’s dollar foreign exchange rate in the late City NY trading:
| Country/currency | US$ Equivalent | US$ VS. % CHG | PER US$ |
| Friday | YTD | Friday | |
| Chile peso | 0.001642 | 15.8 | 609.1 |
| Mexico peso | 0.0718 | 6.8 | 13.9334 |
| New Zealand dollar | 0.7843 | 4.8 | 1.275 |
| Singapore dollar | 0.7667 | 3.3 | 1.3043 |
| Swiss francs | 1.0357 | 8.1 | 0.9655 |
| Euro area euro | 1.2452 | 10.4 | 0.8031 |
| Polish zlotys | 0.2976 | 11.1 | 3.3598 |
| Kuwaiti dinar | 3.429 | 3.3 | 0.2916 |
| Vietnamese dong | 0.00005 | 1.1 | 21355 |
Note: The term “chg” refers to change.
Explanation:
The valuable currency from the above table is as follows:
Country K dinar and its value is $3.429
The least valuable currency from the above table is as follows:
Country V dong and its value is $0.00005
Hence, the valuable currency is Country K’s dinar and the least valuable currency is Country V’s dong.
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Chapter 18 Solutions
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