An international corporation located in Country A is considering a project in th

Question

An international corporation located in Country A is considering a project in the United States. The currency in Country A, say X, has been strengthening relative to the US dollar; specifically, the average devaluation of the US dollar has been 2. 6% per year (which is projected to continue). Assume the present exchange rate is 6. 4 units of X per US dollar. What is the estimated exchange rate two years from now If, instead, currency X was devaluating at the same rate relative to the US dollar. What would be the exchange rate three years from now

Explanation / Answer

a) Currently 6.4 X per 1 US dollar. Value of dollar decreases 2.6% per year. 1 dollar -(1 dollar * .026) =.974 .974 - (.974 * .026)= .948676 6.4/.948676= 6.746 is the estimated exchange rate 2 years from now. b) X decreases by 2.6% per year. 6.4 - (6.4 * .026)=6.2336 6.2336-(6.2336*.026)=6.0715264 6.0715264-(6.0715264*.026)=5.913666714 5.913666714/1= 5.913666714 estimated exchange rate three years from now if X has a devaluation of 2.6% per year relative to the US dollar.

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

---

---

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