In: Accounting
Assume that the spot exchange rate between U.S. Dollar and Chinese Yuan is $1 = 6.90 yuans
(a)
Direct exchange quote is 1Yuan = $0.1449
Working : 1/6.9 = 0.1449275
(b)
A HP laptop worth $725 would cost ¥5,002.5
Working : $725 x (1/0.1449275) = ¥5,002.5
(c)
Exchange rate after appreciation is 1Yuan = $0.1667
Working : $0.1449275 x (1+15%) = $0.1667
(d)
After appreciation, the HP laptop would cost ¥4,350
Workings : $725 x (1/0.666667) = ¥4,350
(e)
A pair of sneaker costing ¥300 would cost $43.4783 before appreciation
Working : ¥300/$6.9 = $43.478261
(f)
A pair of sneakers costing ¥300 would cost $50 after appreciation
Working : ¥300 x $0.166667 = $50
(g)
When Yuan appreciates against dollar, the US exports to China will increase. This is because for the goods exported the price will be relatively lower as we can see in the above case of HP laptop. It has reduced from ¥5,002 to ¥4,350
(h)
The imports from China to US will be reduced as the price for goods will be increased in the US market as we can see from the above answers, the price of sneakers has increased from $43.4782 to $50.