4. (Exchange rate; devaluation) The Thai baht (Bt) was devalued by the Thai gove

Question

4. (Exchange rate; devaluation) The Thai baht (Bt) was devalued by the Thai government from Bt 25/$ to Bt 29/S on July 2, 1997 (a) By what percentage did S (USD) change in Bt value on July 2, 1997? (b) Many currency analysts were predicting that the Thai baht would fall an additional 40% from Bt 29 s to Bt X/S by the end of 1997. What is the value of X? (to four decimal places) (c) From mid-September 1997 to mid-December 1997, the Thai baht fell 25% against the US dollar (USD). By how much (%) did USD appreciate against the Thai baht over this period? (d) The Thai baht (Bt) changed from Bt 29/S to Bt 33/S within the period from July 1997 to September 2017. By how much (90) did the Thai baht change over this period (to two decimal places? (e) Find the exchange rate S/ using both Bt 33.0998/S and Bt 39.5424/. (to four decimal places)

Explanation / Answer

4. (a) Bt25 to 1 USD or 0.04USD for 1Bt changed to (1/29)USD to 1 Bt which is 0.034483 USD to 1 Bt. Hence in USD terms the change = (0.04-0.034483)/0.04 = 13.79%

(b) 40% from 29Bt to 1 USD will be 29*(1+40%) = 40.6000Bt to 1 USD

(c) When the Bt depreciated by 25%, the USD appreciation shall be 20%

(d) Thai Bt changed = (33-29)/29 = 13.79% (depreciation)

(e) 33.0998 Bt to 1 USD or 1Bt = 0.0302USD and similarly 1Bt = (1/39.5424)Euro which is 1Bt = 0.0253 Euro. This means 0.0302USD = 0.0253Euro or 1USD = 0.8371 Euro. Written other way 1.1946USD to 1 Euro

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