Need help for this assignment. My foreign country is Australia 1998-2003.

Use geometric instead of arithmetic averages.

Use exact instead of the approximate method.

There is only one correct answer to these questions.

Q1. During the assigned time period: US dollar appreciated / depreciated (choose one) in real terms against the currency of foreign country.

Geometric and Arithmetic Means of Rates and Percentages Ifthe rates for years 1, 2, 3, N are R1, R2, R3, RN , then you can calculate the arithmetic and geometric mean or averages of these rates over the N years, as follows: Arithmetic Mean = ("R1 + R2 + R3 + .. + RN ) l N Geometric Mean [(1+RI )* (1+ R2 )* (1+ R3 ) * **(l+ RN ) 11m - 1 Note, that in the geometric mean formula, the percentages are written in decimals. For example, we use 0.10 instead of 10% and -0.02 instead of -2%. Also in the end we take the Nth root of the product, where N is the number of years in the averaging period. It is important to know that the geometric mean is a more accurate measure than the arithmetic mean. Always try to use the geometric mean method when calculating averages of rate of returns or percentages. Let us assume the following rates of return for the ve year period (20002004) : ----- Our estimate of the average rate of return over the 200004 period based on: Arithmetic Mean : (0.0475 - 0.08 + 0.005 + 0.23 + 0.07) f 5 : 0.0545 : 5.45% Geometric Mean = [(1+ 0,0475)*(1 _ (")8th + 0_005)*(1 + 0_23)*(1 + 0.07) ]U5 _ 1 : 032746672?" - l = 0.04973 = 4.973% 4.973 % is a more accurate measure of the average return over the 2000-04 period than 5.45% Consumer Price Index Percent change from year ago 1995 Australia 4.6 Austria 1.6 Canada 2.1 Chile 8.2 China 1?.1 Denmark 2.1 Euro Area 2.6 Finland 0.4 France 1.8 Germany Greece Indonesia 9.4 Ireland Israel 10.0 Italy 5.4 Japan -0.1 Korea 4.5 Malaysia 3_4 Mexico 35.0 Netherlands 1.4 New Zealand 3.8 Norway 2.4 Philippines 8.0 Singapore 1.? South Africa 8.? Spain 4.6 Sweden 2.5 Switzerland 1.8 Thailand 5.8 Turkey 331 United Kingdom 23 United States 2.8 Venezuela 60.0 Research Dlvkion Federal Reserve Bank oi 31. Louis 1996 2.6 1.6 1.6 7.4 8.3 2.1 2.1 1.1 2.1 1.2 7.9 8.0 2.2 11.3 4.0 0.1 4.9 3.5 34.4 1.5 2.3 1.2 9.0 1.4 7.4 3.6 0.5 0.6 5.6 60.4 2.5 2.9 99.6 1997 0.2 1.2 1.6 6.1 2.6 2.2 1.? 1.2 1.3 1.5 5.4 6.2 1.3 9.0 1.9 1.6 4.4 2.? 20.6 1.9 1.2 2.6 5.9 2.0 6.6 1.9 0.7 0.5 5.6 85.? 1.6 2.3 50.0 1998 0.9 0.8 1 .0 5.1 -0.9 1 .8 1 .2 1 .3 0.7 0.6 4.5 53.4 2.1 5.5 2.0 0.7 7.5 5.3 15.9 1 .8 1 .3 2.3 9.7 -0.3 6.9 1 .8 -0.3 0.0 8.1 64.6 1 .6 1 .5 35.8 1999 1 .5 0.5 1 .7 3.3 -1 .4 2.5 1 .1 1 .3 0.6 0.6 2.1 20.5 2.5 5.2 1 .7 -0.3 0.3 2.7 1 6.6 2.0 0.1 2.3 6.7 0.0 5.2 2.2 0.5 0.3 0.3 34.9 1 .3 2.2 23.6 2000 4.5 2.0 2.7 3.6 0.3 2.9 2.2 2.9 1.6 1.4 2.9 3.7 5.3 1.1 2.6 -0.7 2.3 1.5 9.5 2.3 2.6 3.1 -0.2 1.4 5.3 3.5 0.9 1.6 1.6 54.9 0.6 3.4 16.2 2001 4.4 2.3 2.5 3.6 0.5 2.4 2.4 2.7 1.2 1.9 3.7 11.5 4.0 1.1 2.3 4.0 1 .4 6.4 5.1 2.6 3.0 6.8 1 .0 5.? 2.3 2.4 1 .0 1 .7 54.4 1 .2 2.8 12.5 2002 3.0 1 .7 2.3 2.5 -0.8 2.4 2.3 2.0 1 .9 1 .4 3.9 1 1 .9 4.7 5.? 2.6 -0.9 2.8 1 .8 5.0 3.9 2.7 1 .3 3.0 -0.4 9.2 3.6 2.2 0.6 0.6 45.0 1 .3 1 .6 22.4 2003 2.6 1.3 2.6 2.6 1.2 2.1 2.1 1.3 2.2 1.0 3.4 6.6 4.0 0.7 2.8 -0.2 3.5 1.0 4.5 2.2 1.8 2.5 3.6 0.5 5.9 3.1 1.9 0.6 1.8 21.6 1.4 2.3 31.1 2004 2.3 2.0 1 .9 1.1 3.9 1.2 2.1 0.1 2.3 1.6 3.0 6.2 2.3 0.4 2.3 -0.0 3.6 1.5 4.? 1.4 2.3 0.5 5.9 1.6 1.4 3.1 0.4 0.8 2.6 6.6 1.3 2.7 21.7 2005 2.7 2.1 2.2 3.0 1.3 1.6 2.2 0.8 1.9 1.9 3.5 10.5 2.2 1.3 2.2 -0.3 2.8 3.0 4.0 1.5 3.0 1.5 7.6 0.5 3.4 3.4 0.5 1.2 4.6 6.2 2.1 3.4 16.0 2006 3.5 1 .7 2.0 3.4 1 .5 1 .9 2.2 1 .3 1 .9 I .8 3.3 13.1 2.7 2.1 2.2 0.2 2.2 3.6 3.6 1 .7 3.4 2.3 6.3 1 .0 4.6 3.6 1 .4 1 .1 4.6 9.6 2.3 3.2 13.6 2007 2.3 2.2 2.1 4.4 4.3 1.7 2.1 1.6 1.3 2.3 3.0 6.4 2.3 0.5 2.0 0.1 2.5 2.0 4.0 1.6 2.4 0.7 2.3 2.1 7.1 2.3 2.2 0.7 2.2 3.3 2.3 2.9 13.7 Reference Tables International Economic Trends Exchange Rates Percent appreciation (+) or depreciation (-) ol the U.S. dollar against the local currency 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Australia -1.3 -5.3 5.3 18.1 -2.4 11.0 12.5 4.9 -16.7 -11.5 -3.4 1.2 -10.1 Canada 0.5 -0.7 1.6 7.1 0.1 -0.0 4.3 1.4 -10.8 -7.1 -6.9 -6.4 -5.3 Chile -5.6 3.9 1.7 9.3 10.5 6.1 17.7 8.5 0.4 -11.8 -8.2 -5.3 -1.5 China -3.1 -0.4 -0.2 -0.2 -0.3 0.0 -0.0 0.0 0.0 -0.0 -1 .0 -2.7 -4.6 Denmark -11.3 3.5 13.9 1.4 4.2 15.9 2.9 -5.3 -16.6 -9.0 0.1 -0.9 -3.4 Euro Area -8.7 2.3 13.9 1.6 4.4 15.5 3.1 -5.3 -16.5 -9.0 -0.1 -0.9 -3.4 Indonesia 4.1 4.2 24.2 244.2 -21 .6 7.2 21.8 -9.3 -7.9 4.2 8.6 -5.6 -0.2 Israel 0.0 6.0 3.1 10.2 8.9 -1.5 3.1 12.7 -3.9 -1.6 0.1 -0.7 -7.8 Japan -7.9 15.6 11.3 8.0 -13.1 -5.2 12.7 3.1 -7.5 -6.7 1.3 5.6 1.2 Korea 4.2 4.2 13.5 47.2 -15.3 -4.9 14.2 -3.2 -4.7 -3.9 -10.6 -6.3 -2.6 Malaysia 4.4 0.3 12.0 39.3 -3.2 0.0 0.0 0.0 -0.0 0.0 -0.3 -3.2 -6.3 Mexico 90.2 18.4 4.2 15.4 4.6 -1.1 -1.2 3.4 11.7 4.6 -3.4 0.0 0.3 New Zealand -9.5 -4.6 3.8 23.4 1 .4 15.9 3.7 -9.5 -20.2 -12.4 -5.7 8.4 -1 1.7 Norway -10.2 1.9 9.6 6.6 3.3 12.9 2.1 -11.2 -11.4 -4.8 -4.4 -0.5 -3.7 Philippines -2.7 2.0 12.4 38.3 -4.4 13.1 15.4 1.2 5.0 3.4 -1.7 -6.3 -10.1 Singapore -7.2 -0.5 5.4 12.5 1 .4 1.8 3.9 -0.1 -2.7 -3.0 -1 .5 -4.6 -5.2 South Africa 2.1 18.5 7.2 20.0 10.6 13.6 24.2 21.9 -28.2 -1 4.7 -1.4 6.4 4.2 Sweden -7.5 -6.0 13.9 4.1 3.9 11.0 12.7 -6.0 -16.9 -9.1 1.7 -1.3 -3.4 Switzerland -13.5 4.6 17.3 -0.1 3.7 12.5 -0.1 -7.3 -13.6 -7.6 0.3 0.6 -4.3 Thailand -0.9 1.7 22.5 33.0 -8.3 6.2 10.7 -3.3 -3.4 -3.1 -0.1 -5.9 -15.0 Turkey 54.3 77.6 36.6 71.7 60.6 49.3 96.0 23.0 -0.4 -5.0 -5.7 6.3 -3.8 United Kingdom -2.9 1.1 -4.7 -1.2 2.4 6.7 5.3 4.2 -8.1 -10.8 0.7 -1.3 -7.9 United Statw -5.6 4.5 7.7 4.3 -1.6 4.9 6.0 -1.5 -12.3 -3.2 -1.9 -1.5 -5.6 Venezuela 19.0 136.1 17.1 12.0 10.6 12.3 6.5 60.4 38.4 17.7 10.5 2.7 0.0 1Percent appreciation (+) or depreciation (-) oi the U.S. dollar against a group of currencies International Economic Trends Reference Tables Short-Term Interest Rates Annual percent 1995 1096 199? 1908 1 009 2000 2001 2002 2003 2004 2005 2006 200? Australia 7.7 7.2 5.4 5.0 5.0 6.2 4.9 4.7 4.9 5.5 5.6 6.0 6.7 Canada 5.9 3.1 4.6 5.0 5.2 5.3 2.1 2.9 2.7 2.6 3.5 4.3 4.6 Chile 13.7 13.5 12.0 14.9 3.6 9.2 6.2 3.6 2.7 1.9 3.9 5.1 5.6 China 10.4 9.0 3.6 4.6 3.2 3.2 3.2 2.7 2.7 3.3 3.3 3.3 3.3 Denmark 6.1 3.9 3.7 4.1 3.3 4.9 4.6 3.5 2.4 2.1 2.2 3.1 4.3 Euro Area 6.6 5.1 4.4 4.0 3.0 4.4 4.3 3.3 2.3 2.1 2.2 3.1 4.3 Indonesia 16.7 17.3 20.0 39.1 25.7 12.5 15.5 15.5 10.6 6.4 3.1 11.4 3.0 Israel 14.4 15.3 13.4 11.3 11.4 6.3 6.5 7.4 7.0 4.3 4.3 5.5 Japan' 1.2 0.6 0.6 0.7 0.2 0.2 0.1 0.1 0.0 0.0 0.0 0.2 0.7 Korea 12.6 12.4 13.3 15.0 5.0 5.2 4.7 4.2 4.0 3.7 3.4 4.2 4.3 Malaysia 5.5 6.4 6.4 6.9 3.5 2.9 2.3 2.7 2.6 2.4 2.5 3.2 3.4 Mexico 43.2 32.9 22.3 27.1 24.6 17.2 13.4 3.5 7.2 7.4 9.6 7.7 7.3 New Zealand 9.0 9.3 7.7 7.3 4.6 6.5 5.7 5.7 5.4 6.1 7.1 7.5 3.3 Nomav 5.5 4.9 3.7 5.6 6.5 6.7 7.2 6.9 4.1 2.0 2.2 3.1 5.0 Philippines 11.3 12.3 12.9 15.0 10.0 9.9 9.7 5.5 5.9 7.3 6.1 5.3 3.4 Singapore 2.6 2.9 4.4 5.0 2.0 2.6 2.0 1.0 0.7 1.0 2.3 3.5 2.7 South Africa 13.5 15.0 15.3 16.5 12.9 10.1 9.7 11.2 10.7 7.5 6.9 7.3 9.1 Sweden 6.7 5.6 4.1 4.2 3.1 4.0 4.0 4.1 3.0 2.1 1.7 2.3 3.6 Switzerland 2.9 2.0 1 .6 1.5 1.4 3.2 2.9 1.1 0.3 0.5 0.6 1.6 2.6 Thailand 10.3 12.1 21.7 2.6 1.2 1.7 2.1 1.6 1.0 1.3 3.6 4.9 3.2 Turkey 72.3 76.2 70.3 74.6 73.5 33.9 92.4 59.5 33.5 23.6 15.6 17.9 16.2 United Kingdom 6.7 6.0 6.6 7.3 5.4 6.1 5.0 4.0 3.7 4.6 4.7 4.6 6.0 United States 5.9 5.4 5.6 5.5 5.3 6.5 3.7 1.7 1.2 1.6 3.5 5.2 5.3 Venezuela 49.0 45.0 45.0 60.0 33.0 33.0 37.0 40.0 23.5 26.5 23.5 26.5 26.5 "The actual value for 2003 is 0.037: the actual value for 2004 is 0.029; the actual value for 2005 is 0.029