Question

1. If a financial calculator costs ¥3,980 while the same calculator costs $40 in the United States, what is the current exchange rate of US dollars for Yen? If, over the next year, inflation is 6% in Japan and 10% in the United States, what will the calculator cost next year? What is the exchange rate of US dollars for Yen with inflation?

Answer 1

Current cost of the calculator in Japan= ¥3,980

Current cost of the calculator in USA= $40

Current exchange rate of US dollars for Yen = Current cost of the calculator in USA/Current cost of the calculator in Japan

= 40/ 3,980

= 0.01005025125 (approx 0.1005)

or 99.50

If the inflation rate next year is 6% in Japan and 10% in the United States, the cost of calculator next year will be Current cost of the calculator in Japan= ¥3,980 * (1+Inflation rate in Japan)

=¥3,980 * (1+0.06)

= ¥4,218.80

the cost of calculator next year will be= Current cost of the calculator in US (1+10%)

= 40(1+10%)

=$ 44

The exchange rate= ¥4,218.80/ $ 44

=95.8818 (approx)