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The country of Queensville is planning to issue bonds denominated in U.S. dollars. The bond issue...

The country of Queensville is planning to issue bonds denominated in U.S. dollars. The bond issue will be worth $1 billion. The current exchange rate between the dollar and the queeny (Queensville’s currency) is $1 equals 1 queeny. Suppose the exchange rate changes so $1 is now equal to 1.25 queeny.

a.         Did the queeny appreciate or depreciate against the dollar. Explain.

b.         How much will it cost Queensville to repay this loan?

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