Japanese Motors exports cars and trucks to the U.S. Market. On March 9, 2010, it

Question

Japanese Motors exports cars and trucks to the U.S. Market. On March 9, 2010, its most popular model was selling (wholesale) to U.S. dealers for $20,000. What price must Japanese Motors charge for the same model on Febrary 25, 2013, to realize the same aount (of Japanese yen) as it did in 2010?

Using the table below:

Spot Foreign Exchange Rates (Direct Quotes)

TABLE 2.1 Spot Foreign Exchange Rates (Direct Quotes) Exchange Rate (U.S. Dollars) March 9, 2010 February 25, 2013 Country Australia U.K Canada India Japan South Africa Switzerland Euro area Currency Dollar Pound Dollar Rupee Yen Rand Franc Euro $0.9140 $1.4995 S0.9744 $0.02193 0.011113 $0.1354 $0.9299 $1.3600 $1.0258 $1.5165 $0.9745 $0.01845 $0.010891 $0.1129 $1.0728 $1.3062

Explanation / Answer

The amount that will be charged to get the same of Japanese Yen as on 9, March 2010 in Year 2013 on Feburary 25 can be calculated with the use of following formula:

Amount in Japanese Yen as on February 25, 2013 = Sales Value as on 9 March 2010 in Dollar Terms/Spot Rate as on 9 March 2010*Spot Rate as on 25 February 2013

_____________

Solution:

Using the values provided in the question, we get,

Amount in Japanese Yen as on February 25, 2013 = 20,000/0.011113*0.010891 = $19,600.47 or $19,600 (answer)

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