Question

The Canadian dollar per U.S. Dollar spot rate today, 3/1/2017 is 1.3500 / 1.3525 Canadian dollars per U.S. Dollar. The spot rate on 2/1/2017 was 1.3435 / 1.3450 Canadian dollars per U.S. dollar. (a) What has happened to the CAD in reference to the USD over the last month? (b) What does 1.3500 / 1.3525 mean? (c) If you sold $50,000,000 on 2/1/2017 how many CAD $ would you get? (d) If you turned around and sold that amount of CAD on 3/1/2017 for USD, how many USD would you get?

Answer 1

a). On 3/1/2017, for every Canadian dollar, an American will have to pay 0.9981 USD.

On 1/2/2017, for every Canadian dollar, an American had to pay 0.9988 USD.

Thus, the American currency has certainly appreciated against the Canadian dollar because now an American has to pay lesser USD for every Canadian Dollar.

b). 1.3500/1.3525 means that for every 1.35 USD a person will be able to get 1.3525 Canadian Dollar in the foreign exchange market.

c). 50,000,000 USD on 1/2/2017 = 50,000,000 * (1.3450/1.3435)= 50,055,824.339 Canadian Dollar

d). 50,000,000 CAD on 1/3/2017 = 50,000,000 * (1.3500/1.3525) = 49,907,578.558 USD