Suppose the U.S.-dollar-per-currency exchange rate of the euro was 0.8836 an Thursday and 0.8828 on Friday. Did the euro appreciate or depreciate relative to the U.S. dollar?.How much was the appreciation/depreciatiori (in percentage change terms)?
Suppose the U.S.-dollar-per-currency exchange rate of the euro was 0.8836 an Thursday and 0.8828 on Friday. Did the euro appreciate or depreciate relative to the U.S. dollar?.How much was the appreciation/depreciatiori (in percentage change terms)?
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter27: Multinational Financial Management
Section: Chapter Questions
Problem 6P
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Transcribed Image Text:Suppose the U.S.-dollar-per-currency exchange rate of the euro was 0.8836 an
Thursday and 0.8828 on Friday. Did the euro appreciate or depreciate relative
to the U.S. dollar?.How much was the appreciation/depreciatiori (in percentage
change terms)?
Transcribed Image Text:5. In January 1999, the spot exchange rate for the euro was 0.90 €/S. In July
2000, the rate was 1.08 €/S. In January 1999, the euro-wide CPI was 105..3 and
the U.S. CPI was 108.0. In July 2000, the euro-wide CPI was 108.8 and the U.S.
CPI was 113.3.
Based on this information, in nominal terms did the euro appreciate or
depreciate againsr the dollar? What was the rate of appreciation or depreciation?
6. Using the information in Question 5; calculate the January 1999 real exchange
tate for the curo. Calculate the July 2000 real exchange rate for the euro.
7. Based on your answers to Question 6, in real terms did the euro appreciate or
depreciate? What was the rate of appreciation or depreciation?
S. Eased on the information in Question 5, and according to absolute purchasing
power parity (P.PP), was the euro overvalued or undervaiued relative to the dol-
lar in July 2000? By what percent?
9. Based on the information in Question 5, and according to relative PPP, what is,
the predicted valúe for the euro for July 2000?
10. According to your answer to Question 8, was the euro over- or undervalued rel-
ative to the dollar in July 2000? By.what percent?
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