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Question 1 Suppose you want to buy a car. You either want to buy a Chevrolet for US$ 23,000, a Volkswagen for 15.900, a Honda
Question 1 Suppose you want to buy a car. You either want to buy a Chevrolet for US$ 23,000, a Volkswagen for 15.900, a Honda for 2.2 million or a Hyundai for 22 milion korean won. The following exchange rates are given. US dollar exchange rates Euro exchange rates American dollar 1.0 0.80 European euro 1.25 1.0 Japanes yen 9.43 0.0074 Korean won 0.0009 0.0007 (a) Explain how exchange rates are defined in the table above. (4 marks) (b) Which currency is stronger between the American dollar and the European euro? Explain your answer. (3 marks) (c) Which car is cheapest when all prices are expressed in American dollars? Show your calculations. (4 marks) (d) Which car is cheapest when all prices are expressed in European euro? Show your calculations. (4 marks) (e) Which currency has to appreciate for the cheapest car to become most expensive? Explain your answer. (4 marks) (1) Which currencies have to depreciate for the cheapest car to become more expensive? Explain your answer. (4 marks) (g) Calculate the eurolyen, and yen/won cross exchange rates. (2 marks)
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