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

Canadian dollar (CAD) 0.7950

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.

Homework Answers

Answer #1

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.

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
The nominal foreign exchange rate is the value of foreign goods in the domestic currency. the...
The nominal foreign exchange rate is the value of foreign goods in the domestic currency. the value of domestic goods in the foreign currency. the rate at which one currency is traded for another. the difference between what a good costs in the domestic currency and the foreign currency.
If the nominal exchange rate was one U.S. dollar for 115 Japanese yen and then changed...
If the nominal exchange rate was one U.S. dollar for 115 Japanese yen and then changed to one dollar for 112 Japanese yen, we could accurately state that the dollar depreciated in relation to the yen and the yen appreciated in relation to the dollar. True or False?
Barry speculates in the foreign currency exchange market. Currently the spot price for the Japanese yen...
Barry speculates in the foreign currency exchange market. Currently the spot price for the Japanese yen is ¥129/$ and the 6-month forward rate is ¥128 /$. Barry believes the yen will become ¥126.00/$ in the next six months. To profit as a speculator, Barry should ________ at ________ . Select one: a. buy dollars; the forward rate b. sell yen; the forward rate c. buy yen; the forward rate d. buy dollars; spot rate
TRUE FALSE. If false CORRECT the wrong word/words An increase in the nominal exchange rate ($...
TRUE FALSE. If false CORRECT the wrong word/words An increase in the nominal exchange rate ($ per Euro) will make the dollar less expensive to foreigners If iD= 10% and iF = 5%, for investors to be indifferent between holding both one year financial assets, they should expect expect that over the next year the domestic currency will appreciate. A trade deficit implies that that country will require a surplus in the financial account compensating that deficit. An increase in...
One function of the foreign exchange market is to convert the currency of one country into...
One function of the foreign exchange market is to convert the currency of one country into the currency of another. A second function of the foreign exchange market is to provide insurance against foreign exchange risk. The most common approach to exchange rate forecasting is fundamental analysis. This relies on variables such as money supply growth, inflation rates, nominal interest rates, and balance-of-payment positions to predict future changes in exchange rates. Identify a country outside of the U.S. and its...
If on Tuesday you can buy 125 yen per U.S. dollar and on Wednesday you can...
If on Tuesday you can buy 125 yen per U.S. dollar and on Wednesday you can buy 120 yen per U.S. dollar, a. both the U.S. dollar and the yen have appreciated. b. both the U.S. dollar and the yen have depreciated. c. the U.S. dollar has appreciated and the yen has depreciated. d. the U.S. dollar has depreciated and the yen has appreciated. If the U.S. dollar appreciates in the foreign exchange market, a. American goods will become more...
1a. The nominal exchange rate between the United States dollar and the Japanese yen is which...
1a. The nominal exchange rate between the United States dollar and the Japanese yen is which of the following? -The reciprocal of the real exchange rate -The rate at which one of the currencies can be converted into the other currency -Always equal to the real effective exchange rate except when nominal interest rates within the two countries diverge -Always equal to the real effective exchange rate except when real interest rates within the two countries diverge b. If German...
Foreign Exchange Markets Multiple-Choice: 1. The theory of purchasing-power parity indicates that if the price level...
Foreign Exchange Markets Multiple-Choice: 1. The theory of purchasing-power parity indicates that if the price level in the United States rises by 5% while the price level in Mexico rises by 6%, then a. the dollar appreciates by 1% relative to the peso. b. the dollar depreciates by 1% relative to the peso. c. the exchange rate between the dollar and the peso remains unchanged. d. the dollar appreciates by 5% relative to the peso. e. the dollar depreciates by...
Exchange rates can be quoted as foreign currency per unit of domestic currency or domestic currency...
Exchange rates can be quoted as foreign currency per unit of domestic currency or domestic currency per unit of foreign currency. Unless otherwise stated, we adopt the convention that is given in your textbook, that is, we define exchange rates as domestic currency per unit of foreign currency. Using the dollar and euro as a currency pair, the bilateral exchange rate is E$/€, expressed as dollars per euro. a. Suppose that the initial exchange rate is given as $1/€1, i.e.,...
MXN/USD .04 in nominal currency exchange rate terms. A Volvo costs $43,000 in the U.S. The...
MXN/USD .04 in nominal currency exchange rate terms. A Volvo costs $43,000 in the U.S. The same Volvo costs 975,000 Pesos in Mexico. Based on these data points, select all correct responses below. I. The USD is undervalued. II. The USD is overdervalued. III. If PPP were to exist at MXN/USD .04, I would expect to pay 975,000 for the Volvo in Mexico. IV. If PPP were to exist at MXN/USD .04, I would expect to pay 1,075,000 for the...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT