Surname 1

Assessment 10

Name

Professor

Course

Date

Problem 1: Currency Appreciation

Suppose that 1 Euro could be purchased in the foreign exchange market today for $0.25. If

the Euro appreciated 10 percent tomorrow against the dollar, how many Euros would a

dollar buy tomorrow?

Solution

1 Euro=$0.25

1 $=1/0.25 Euro

=4 Euros

Formula:

Appreciation %= {(P1-P2) P1} 100

P1= Existing Price=$4 Euros

P2= Appreciated Price=?

Appreciation %=10%

10%={(4-P2) /4} x 100

0.10={(4-P2) /4}

0.40=4-P2

P2=$4.00-$0.40
 Surname 2

P2=$3.60

Problem 2: Cross Rates

Assume the exchange rate between US dollar and Indian Rupee is 60 Rupees = $1, and the

exchange rate between dollar and British pound is 1 Pound = $1.5. What is the exchange

rate between the Rupee and pound?

Solution

Exchange rate between Dollar and Indian Rupees:

1 $ = Rs 60

Then the value of $ 1.5 = Rs 60 * 1.5

$ 1.5 = Rs 90

Exchange rate between Dollar and British Pound:

1 Pound = $ 1.50

Therefore, the Exchange between the Rupees and Pound:

I Pound = Rs 90 (As $ 1.5 is equal to Rs 90, as calculated above)

And Rs 1 = 0.01 Pound