Question

# Pricing foreign goods The nominal exchange rate is the price of one currency in terms of...

Pricing foreign goods The nominal exchange rate is the price of one currency in terms of another currency. A nominal exchange rate specifies how many units of one country's currency are needed to buy one unit of another country's currency.

Suppose the following table presents nominal exchange rate data for November 26, 2014, in terms of U.S. dollars per unit of foreign currency.

Use the information in the table to answer the questions that follow.

Foreign Currency Cost of One Unit of Foreign Currency (Dollars)

Brazilian real (BRL) 0.4067

Euro (EUR) 1.2035

Japanese yen (JPY) 0.009126

Mexican peso (MXN) 0.0920

United Kingdom pound (GBP) 1.8011

Suppose that on November 26, 2014, an ornamental bookcase handmade in the United Kingdom is priced at GBP 570. The approximate U.S. dollar price of the bookcase would be.

If the nominal exchange rate for the U.S. dollar–Japanese yen rises from \$0.009126 to \$0.0109512 per Japanese yen, the Japanese yen in value, or , relative to the U.S. dollar.

a) The approximate U.S dollar price of the bookcase would be equal to \$1026.6

explanation - THe nominal U.S dollar-U.K exchange rate is equal to 1.8011. which means to buy one U.K pound, you need 1.8011 U.S dollar .or in other words, you have to pay \$1.8011 to buy one U.K pound. therefore, bookcase handmade which is price at GBP 570 is worth = 570 *1.8011 = \$1026.62

b)  If the nominal exchange rate for the U.S. dollar–Japanese yen rises from \$0.009126 to \$0.0109512 per Japanese yen, the Japanese yen increase in value or appreciation relative to the U.S. dollar.

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