Engineering Economy
16th Edition
ISBN: 9780133582819
Author: Sullivan
Publisher: DGTL BNCOM
expand_more
expand_more
format_list_bulleted
Concept explainers
Question
Chapter 8, Problem 33P
(a):
To determine
Calculate the estimated exchange rate.
(b):
To determine
Calculate the new estimated exchange rate.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
On 26 May 2021 it cost $1.41 (USD) to buy one British Pound, while the 10-year British Government Bond interest rate was 0.755% and the US Government Bond 10-year interest rate was 1.56%. Six months later, on 26 November 2021 it cost $1.33 (USD) to buy one British Pound, while the 10-year British interest rate was 0.839% and the US 10-year rate was 1.51%. Is the change in the USD, British Pound exchange rate consistent with the International Fisher Effect (IFE)? Why or why not?
USD 0.0202675=1 INR and USD 2.59713=1 OMR. The OMR is not quoted against INR. You are required to identify the following;
a)Determine the Exchange Rate for OMR/INR?
How much INR the customer will be receiving if exchange OMR1,500?
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
Chapter 8 Solutions
Engineering Economy
Ch. 8 - Prob. 1PCh. 8 - Prob. 2PCh. 8 - Prob. 3PCh. 8 - Prob. 4PCh. 8 - Prob. 5PCh. 8 - Prob. 6PCh. 8 - Prob. 7PCh. 8 - Prob. 8PCh. 8 - Prob. 9PCh. 8 - Prob. 10P
Ch. 8 - Prob. 11PCh. 8 - Prob. 12PCh. 8 - Prob. 13PCh. 8 - A commercial building design cost 89/square-foot...Ch. 8 - Prob. 15PCh. 8 - Prob. 16PCh. 8 - Prob. 17PCh. 8 - Prob. 18PCh. 8 - Prob. 19PCh. 8 - Prob. 20PCh. 8 - Prob. 21PCh. 8 - Prob. 22PCh. 8 - Prob. 23PCh. 8 - Prob. 24PCh. 8 - Prob. 25PCh. 8 - Prob. 26PCh. 8 - Prob. 27PCh. 8 - Prob. 28PCh. 8 - Prob. 29PCh. 8 - Prob. 30PCh. 8 - Prob. 31PCh. 8 - Prob. 32PCh. 8 - Prob. 33PCh. 8 - Prob. 34PCh. 8 - Prob. 35PCh. 8 - Prob. 36PCh. 8 - Prob. 37PCh. 8 - Prob. 38PCh. 8 - Prob. 39PCh. 8 - Prob. 40PCh. 8 - Prob. 41PCh. 8 - Prob. 42PCh. 8 - Prob. 43PCh. 8 - Prob. 44PCh. 8 - Prob. 45PCh. 8 - Prob. 46PCh. 8 - Prob. 47PCh. 8 - Prob. 48PCh. 8 - Prob. 49SECh. 8 - Prob. 50SECh. 8 - Prob. 51SECh. 8 - Prob. 52CSCh. 8 - Suppose the cost of electricity is expected to...Ch. 8 - Prob. 54CSCh. 8 - Prob. 55FECh. 8 - Prob. 56FECh. 8 - Prob. 57FECh. 8 - Prob. 58FECh. 8 - Prob. 59FECh. 8 - Prob. 60FECh. 8 - Prob. 61FE
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Similar questions
- Suppose the annual interest rates in the U.S. (home nation) and the U.K (foreign nation) are 8% and 6%, respectively. A U.K. interest arbitrager decides to invest £10,000 in the U.S for three months. Given that the current spot rate is $2 per pound, calculate the EUD from investing in the U.S., assuming that on the maturity date the U.S. dollar is expected to depreciate by 1%. Interpret your result.arrow_forwardSuppose that today is 1st January 2022, Anthony Tan is interested in hiring a software engineer from Malaysia for his company Grab in the United States by using a 3-month short-term contract to control and monitor the mobile app development. The current exchange rate between US Dollars and Malaysian Ringgit (RM) is:1 USD equals RM 4.12. (i) What should Anthony Tan do to manage the international exposure from operational, if, in March 2022, the exchange rate is 1 USD = RM 4.25? (ii) What should Anthony Tan do to manage the international exposure from operational, if, in June 2022, the exchange rate is USD 1 = RM 3.98?arrow_forward(b) You are a foreign exchange trader in an investment bank. Your foreign exchange dealer has quoted the following exchange rates: USD1 = SGD 1.3328 / 38 USD1 = MYR 4.1010 / 24 (i) Given the recent changes in government policy, you foresee an appreciation in value of SGD against MYR and have decided to purchase SGD 200,000 using the above exchange rate. Calculate the amount of MYR required for this transaction. (ii) Assume you have purchased USD 70,000 at the above USD/MYR exchange rate. You plan to hold the USD overnight and would like to limit the losses to a maximum of MYR 8,000. Calculate the stop loss rate for the USD position.arrow_forward
- ArtTech exports a specialized machine part to Japan. The price set in Japan is ¥120,000 and the cost incurred in the US is $800. The current exchange rate is ¥120 per dollar. Over a year the inflation rate in US is 2% and the inflation rate in Japan is 1%. The price in Japan increases with the local inflation rate and the cost in the US increases by the US inflation rate. What will be the percentage change in the profit per unit one year later if the exchange rate did not change? [First compute the profit before and after the price/cost changes due to inflation.] -1% -2% -3% If the market exchange rate remains constant while the PPP based exchange rate rises (for rates quoted as dollars per pound) the real exchange rate (dollars per pound) will: Increase Decrease If the nominal exchange rate (dollars per pound) remains constant and the inflation in UK is greater than the inflation rate in the US we can conclude that:…arrow_forwardAt the start of May, you purchased some shares in Apple (a US company) for $US 43.87, and hedged your position using forward contracts (hedging the purchase value of the shares). The exchange rate at the time of purchase was $US1 = $NZ 2.73, while the one month NZ interest rate was 7.90% and the one month US interest rate was 7.30% (both rates are per annum, with monthly compounding). At the end of May, the exchange rate was $US1 = $NZ 2.78, while the shares were worth $US 41.63. Apple paid no dividends during May. What was your ($NZ) holding period return over the month of May?arrow_forwardAn American (USA) car currently costs $18,000 while the equivalent United Kingdom (UK) car costs £10,000. The nominal UK interest rate is 8 per cent and the nominal US interest rate is 5 per cent. The real interest rate in the two countries is equal at 2 per cent and the nominal interest rate differential is fully explained by expected inflation differentials. (i) Determine the current Purchasing Power Parity (PPP) exchange rate measured as dollars per pound. (ii) Assuming that international investors are risk neutral, calculate the percentage by which the pound is expected to appreciate or depreciate against the dollar. (ii) If the actual inflation rate coincides with the expected inflation rate and absolute purchasing power parity holds on a continuous basis, calculate the PPP exchange rate measured as dollars per pound in one year's time.arrow_forward
- Manitowac Crane is a US company that exports heavy crane equipment to several Chinese dock facilities. Sales are currently 150 units per year at the yuan equivalent of $24,000 each. The yuan currently trades at 6.35 yuan per dollar, but you predict it will fall to 7 yuan per dollar soon and stay there the entire year. Assume direct unit costs are 75% of the original US sales price in either scenario. Calculate gross profits in dollars if you raise the yuan price to offset the devaluation (keeping the dollar price the same) and suffer a 15% drop in volume.arrow_forwardThe Foreign Exchange Market The Jamaican dollar experienced a rapid depreciation in the exchange rate during 2020/1 due to the pandemic's impact on key sectors. The exchange rate in 2022 closed at J$153.65 to US$1.00, after opening the year at J$150.62, resulting in a 7.6 per cent depreciation. As of Friday October 6, 2023, the exchange rate was at approximately $ JA 155 to US $1. QUESTION Given this rapid depreciation of the Jamaican dollar against the US dollar, should the government of Jamaica adopt a Fixed Exchange Rate regime OR maintain the current Floating Rate regime? Outline to answering the question: Clear distinction between fixed exchange rate and floating exchange rate. Examples of countries that use fixed exchange rate regime and those that use floating exchange rate regime. Arguments for and against floating exchange rate Arguments for and against fixed exchange ratearrow_forwardLet’s suppose you (USA dealer) imported a product from German on Dec 1, 2018 at € 300, payable in 60 days. You sold the product in the US market at $400 in cash on Dec 15, 2018. The company's fiscal year ends on Dec 31. You paid to your German supplier on Feb 1, 2019. Below, please find the exchange rate information: Dec 1, 2018: 0.8 €/$.. Dec 31, 2018: 1.5 €/$. Feb 1, 2019: 0.6 €/$. What was net income for 2018 and 2019, respectively? Group of answer choices -$200, -$100 -$100, $200 $300, -$200 $200, -$300arrow_forward
- Let’s suppose you (USA dealer) imported one Earth Equipment machine from German dealer on March 1, 2017 at € 300,000 each, payable in 30 days. The exchange rate on March 1, 2017 was 1.16 US$/€. Then you sold the machine in the US market at US$350,000 in cash on March 29, 2017. On April 1, 2017, you paid to Italian car dealer at the exchange rate of 1.19 US$/€. What was profit or loss from this business in terms of US$? (Please assume all costs are included in price.) Group of answer choices -7000 -9200 -4500 -10200arrow_forwardIf prices grew at a compound growth rate of 4% per annum in the United States and 0.07% 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 171.7/USD JPY 79.2/USD JPY 173.6/USD JPY 80.1/USDarrow_forwardThe answer should be typed. With 100% accuracy.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Principles of Economics (12th Edition)EconomicsISBN:9780134078779Author:Karl E. Case, Ray C. Fair, Sharon E. OsterPublisher:PEARSONEngineering Economy (17th Edition)EconomicsISBN:9780134870069Author:William G. Sullivan, Elin M. Wicks, C. Patrick KoellingPublisher:PEARSON
- Principles of Economics (MindTap Course List)EconomicsISBN:9781305585126Author:N. Gregory MankiwPublisher:Cengage LearningManagerial Economics: A Problem Solving ApproachEconomicsISBN:9781337106665Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike ShorPublisher:Cengage LearningManagerial Economics & Business Strategy (Mcgraw-...EconomicsISBN:9781259290619Author:Michael Baye, Jeff PrincePublisher:McGraw-Hill Education
Principles of Economics (12th Edition)
Economics
ISBN:9780134078779
Author:Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:9780134870069
Author:William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:PEARSON
Principles of Economics (MindTap Course List)
Economics
ISBN:9781305585126
Author:N. Gregory Mankiw
Publisher:Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-...
Economics
ISBN:9781259290619
Author:Michael Baye, Jeff Prince
Publisher:McGraw-Hill Education