Question

In doing the calculations, round to two decimal places.

1. Given the following currency exchange rates:

Time period 1: Sw F 1.55/US$

Time period 2: Sw F 1.35/US$

a.From time period 1 to time period 2, Sw F has depreciated in value relative to US$.

A)True B)False

b.From time period 1 to time period 2, US$ has appreciated in value relative to Sw F.

A)True B)False

c.In time period 1, if the price of Product A was Sw F 16,500, then its price in US$ should be:

A) US$ 10,725 B) US$ 25,575 C) Sw F US$ 10,725 D) Sw F US$ 25,575

d.In time period 2, if the price of Product A was Sw F 16,500, then its price in US$ should be:

A) US$12,210 B) US$22,275 C) Sw F US$12,210 D) Sw F US$22,275

e.In time period 1, if the price of Product B was US$23,500, then its price in SwF should be:

A) SwF 15,275 B) SwF 36,425 C) US$ SwF 15,275 D) US$ SwF 36,425

f.In time period 2, if the price of Product B was US$23,500, then its price in SwF should be:

A) Sw F 17,390 B) Sw F 31,725 C) US$ Sw F 17,390 D) S$ Sw F 31,725

Answer 1

=> Before moving into the answers lets see what happened from time period 1 to time period 2.

* In time period 1, for each US$ we get Sw F 1.55 and In time period 2, we get Sw F 1.35. We can clearly see that the value of US$ has decreased in time period 2 from time period 1. So we can say that from time period 1 to time period 2 US$ has depreciated in value relative to Sw F.

* Since US$ has depreciated in value we can say that Sw F has appreciated in value relative to US$.

=> Now we can move to the answers

`a) From time period 1 to time period 2, Sw F has depreciated in value relative to US$.

=> We know that from time period 1 to time period 2,Sw F has appreciated in value relative to US$ as we have discussed above

=> Therefore the Answer is B)False

b) From time period 1 to time period 2, US$ has appreciated in value relative to Sw F.

=> We know that from time period 1 to time period 2, US$ has depreciated in value relative to Sw F as we have discussed above

=> Therefore the Answer is B)False

c) In time period 1, if the price of Product A was Sw F 16,500, then its price in US$ should be:

=> We know the exchange rate is Sw F 1.55/US$ in time period 1.To get the exchange rate in US$/ Sw F, divide 1/1.55 = 0.65 US$ / Sw F.

=> Now, multiply the price of product A with the obtained exchange rate

=> 16,500*0.65 = US$ 10,725

=> Therefore the answer is A)US$ 10,725

d) In time period 2, if the price of Product A was Sw F 16,500, then its price in US$ should be:

=> We know the exchange rate is Sw F 1.35/US$ in time period 2. To get the exchange rate of US$/ Sw F, divide 1/1.35 = 0.74 US$ / Sw F.

=> Now, multiply the price of product A with the obtained exchange rate

=> 16,500*0.74 = US$ 12,210

=> Therefore the answer is A)US$ 12,210

e) In time period 1, if the price of Product B was US$23,500, then its price in SwF should be:

=> We know the exchange rate is Sw F 1.55/US$ in time period 2.Now, multiply the price of product B with the exchange rate

=> 23,500*1.55 = Sw F 36,425

=> Therefore the answer is B)Sw F 36,425

f) In time period 2, if the price of Product B was US$23,500, then its price in SwF should be:

=> We know the exchange rate is Sw F 1.35/US$ in time period 2.Now, multiply the price of product B with the exchange rate

=> 23,500*1.35 = Sw F 31,725

=> Therefore the answer is B)Sw F 31,725