Question

The exchange rate between China’s Yuan and India’s Rupee yesterday was 0.09 Yuan per Rupee. If the exchange rate today is 0.08 Yuan per Rupee, Which currency appreciated in value?

2. Annie wants to go on vacation next month. She has saved $1,200 Canadian Dollars to use towards her vacation. Which option would give Annie a better deal for her money? Mexico or the U.S.? She looks up the Canadian dollar exchange rates and they are as follows: 0.75 USD per CAD• 14.70 MXN per CAD
Explain your answer.

3. Your company had $1,0000,000 pesos in profit in its operations in Mexico. The exchange rate today
shows that the Mexican peso has appreciated against the USD. You are exchanging your profits into
US Dollars today. Is the new exchange rate good news or bad news for the company? Explain your
answer.

Answer 1

1. The Yuan has appreciated against the Yuan since the exchange rate has fallen.

2. USD received on exchange = 1200 * 0.75 = 900 USD

MXN = 1200 * 14.7 = 17640 MXN

You must opt for a Mexican vacation since you get more Mexican Pesos for the CAD. Also receiving more than your currency means that the country is cheaper than yours and hence you will have more spending power during your vacation.

3.   The Mexican Peso has appreciated which implies that the USD has depreciated. When the USD depreciates, you receive more dollars more conversion and this is certainly good news.