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Chapter 18: Q18 (page 496)

If the Canadian dollar to U.S. dollar exchange rate is 1.24 and the British pound to U.S. dollar exchange rate is 0.68, what must be the Canadian dollar to British pound exchange rate?

Short Answer

Expert verified

The exchange rate would be1.8235Canadiandollars per Britishpound.

Step by step solution

01

Concept Introduction

Exchange rate is that the rate at which domestic currency is exchanged with foreign currency. Exchange rate provides the relative price of fine in terms of domestic and foreign currency. charge per unit is incredibly volatile and it affects the economy's foreign trade. charge per unit is calculated as:

Exchange Rateet=Foreign pricelevelPfDomestic PricelevelPd

02

Explanation of Solution 

Exchange rate ofCanadiandollartoUS dollar is1.24.

Exchange rate of BritishpoundtoUS dollar is0.68.

Calculation of the exchange rate betweenCandB:

localid="1646989707158" Exchangerate=1.24×10.68=1.8235

localid="1646989794752" role="math" Therefore, the exchange rate would be1.8235Canadiandollars per Britishpound.

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Most popular questions from this chapter

“A country is always worse off when its currency is weak (falls in value).” Is this statement true, false, or uncertain? Explain your answer.

Go to the St. Louis Federal Reserve FRED database, and find data on the exchange rate of U.S. dollars per British pound (DEXUSUK). A Mini Cooper can be purchased in London, England, for£17,865orinBoston,UnitedStates,for$23,495.

a. Use the most recent exchange rate available to calculate the real exchange rate of the London Mini per Boston Mini.

b. Based on your answer to part (a), are Mini Coopers relatively more expensive in Boston or in London?

c. What price in British pounds would make the Mini Cooper equally expensive in both locations, all else being equal?

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From 2009 to 2011, the economies of Australia and Switzerland suffered relatively mild effects from the global financial crisis. At the same time, many countries in the euro area were hit hard by high unemployment and burdened with unsustainably high government debts. How should this have affected the euro/Swiss franc and euro/Australian dollar exchange rates?
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