Question

In: Economics

- On April 17, 2018 the exchange rate between the Canadian dollar and the US dollars...

- On April 17, 2018 the exchange rate between the Canadian dollar and the US dollars was 1 CAD = 0.796 USD. On April 5, 2019 the exchange rate was 1 CAD = 0.780 USD. Did the Canadian dollar appreciate or depreciate and by what percent? (1 point)

- Find the exchange rate in terms of US dollars per British pound if on April 5, 2019 the exchange rate between the US dollar and the Mexican peso was 1 USD = 19.07 MXN, and between British pound and Mexican peso 1 GBP = 24.87 MXN. (1.5 points)

Expert Solution

Answer : 1) Based on given information, on 17 April, 2018 the exchange rate was , 1 CAD = 0.796 USD.

On 5 April, 2019 the exchange rate was, 1 CAD = 0.780 USD.

Now we can see that U.S. gets 1 CAD at 0.780 USD in 2019 where U.S. gets 1 CAD at 0.796 USD in 2018. This means that the value of Canadian dollar falls. Because U.S. gets 1 CAD by spending less US dollar in 2019 in compared to 2018. Therefore, the Canadian dollar depreciates.

For 1 CAD the changes in USD = 0.796 - 0.780 = 0.016 USD.

% changes in USD for 1 CAD = (For 1 CAD the changes in USD / Initial USD) * 100

=> % changes in USD for 1 CAD = (0.016 / 0.780) * 100

=> % changes in USD for 1 CAD = 0.020 * 100 = 2%

Therefore, the Canadian dollar depreciates by 2%.

2) Based on given information,

19.07 MXN = 1 USD

=> 1 MXN = 1 / 19.07 = 0.05 USD

As 1 MXN = 0.05 USD,

so, 24.87 MXN = 0.05 * 24.87 = 1.24 USD.

As 1 GBP = 24.87 MXN and as 24.87 MXN = 1.24 USD, hence 1 GBP = 1.24 USD.

Therefore, the exchange rate between US dollar and British pound is, 1 GBP = 1.24 USD.

Rahul Sunny answered 1 year ago

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