Question

Today: $1.50 = £1 Yesterday: $1.42 = £1 What is the percentage pound appreciation/depreciation against the dollar? Select one: a. 5.63% depreciation b. 5.63% appreciation c. 5.91% depreciation d. 5.91% appreciation e. 6.23% appreciation f. 6.23% depreciation

Answer 1

Now first let us ascertain whether it the pound is appreciating or depreciating.

Yesterday you were getting $1.42 for each £1. Today you are getting $1.50 for each £1. This implies with same 1£, you are able to purchase more $ today than you could purchase $ yesterday. This means pound has APPRECIATED.

Now we need to calculate the % appreciation in pound against dollar. For that we would need to write the exchange rate in £/$ terms.

1£ = 1.42$ => 1$ = (1/1.42)£ => 1$ = 0.7042£

1£ = 1.50$ => 1$ = (1/1.50)£ => 1$ = 0.6667£

Appreciation % = (0.7042 - 0.6667)/0.6667 = 5.63% (appreciation)

Hence answer is b.