Dollar Peg for Hong Kong. The Hong Kong dollar has long been pegged to the U.S....

Dollar Peg for Hong Kong. The Hong Kong dollar has long been pegged to the U.S. dollar at 7.75 . When the Chinese yuan was revalued in July 2005 against the U.S. dollar from 8.31 to 8.12, how did the value of the Hong Kong dollar change against the yuan? The original HK$/Yuan cross rate was HK$ nothing/Yuan. (Round to four decimal places.)

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Expert Solution

The Cross rate =Currency A /Currency B*Currency B/Currency C =Currency C/Currency B

Here we are given HKD/$ as 7.75

Before revaluation(original) CNY/$=8.31

After revaluation CNY/$=8.12

So the cross rate prior to revaluation(original) HKD/$xCNY/$ =7.75/8.31=0.9326

The cross rate after revaluation HKD/$xCNY/$ =7.75/8.12=0.954433 that's 0.9544(rounded to 4 decimals)

From the cross rate we can concur that Hong Kong Dollar(HKD) has depreciated or fallen in value against the Chinese Yuan(CNY).

jeff jeffy answered 1 year ago

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