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Fundamentals of Financial Manageme...

9th Edition
Eugene F. Brigham + 1 other
ISBN: 9781305635937

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BuyFindarrow_forward

Fundamentals of Financial Manageme...

9th Edition
Eugene F. Brigham + 1 other
ISBN: 9781305635937
Textbook Problem
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RESULTS OF EXCHANGE RATE CHANGES Early in June 1983, it took 245 Japanese yen to equal $1. In June 2015, that exchange rate had fallen to 124 yen to $1. Assume that the price of a Japanese-manufactured automobile was $9,000 in June 1983 and that its price changes were in direct relation to exchange rates.

  1. a. Has the price, in dollars, of the automobile increased or decreased during the 32-year period because of changes in the exchange rate?
  2. b. What would the dollar price of the automobile be in June 2015, again assuming that the car’s price changes only with exchange rates?

a.

Summary Introduction

To identify: The effect on the price of an automobile during 1983-2015 due to change in exchange rate.

Introduction:

Exchange Rate:

The rate, which indicates the conversion rate for the currency of a country, which can get in exchange for the currency of another country, is the exchange rate.

Explanation
  • The exchange rate of one US dollar in terms of Japanese yen was 245 yen in 1983 and 124 yen in 2015.
  • The decreased exchange rate indicates the increase in the value of the yen in reference to the dollar...

b.

Summary Introduction

To determine: The price of the car in the year 2015 in terms of US dollar.

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