6. Pricing foreign goods The nominal exchange rate is the price of one currency

Question

6. Pricing foreign goods The nominal exchange rate is the price of one currency in terms of another currency. A nominal exchange rate specifies how many units of one country's currency are needed to buy one unit of another country's currency. Suppose the following table presents nominal exchange rate data for August 14, 2014, in terms of U.S. dollars per unit of foreign currency. Use the information in the table to answer the questions that follow. Cost of One Unit of Foreign Currency (Dollars) 0.4755 0.8666 2151 0.008538 0.0942 1.7552 Foreign Currency Brazilian real (BRL) Canadian dollar (CAD) Euro (EUR) Japanese yen PY) Mexican peso (MXN) United Kingdom pound (GBP) Suppose that on August 14, 2014, an ornamental bookcase handmade in Germany is priced at EUR 830. The approximate U.S. dollar price of the bookcase would be If the nominal exchange rate for the U.S. dollar-Japanese yen rises from $0.008538 to s0.0093918 per Japanese yen, the Japanese yen in value, or , relative to the U.S. dollar

Explanation / Answer

(a) US Dollar price of bookcase = EUR 830 x $1.2131/EUR = $1,006.87

(b) If Dollar-yen exchange rate rises from $0.008538 to $0.0093918 per Yen, the Japanese Yen Gains in value (or Increases in value), or Appreciates relative to US Dollar (This is because, price of 1 Yen ahs increased from $0.008538 to $0.0093918).

Related Questions

Navigate

• Browse (All)
• Browse 6
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.