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Question 2 (15 points) Assume Isuzu produces a car in Japan for $1.8 million. On June 1, when new models are introduced, the exchange rate
Question 2 (15 points) Assume Isuzu produces a car in Japan for $1.8 million. On June 1, when new models are introduced, the exchange rate is 150/USD. Consequently, the automaker sets the sticker price for the car at USD 12,000. By August 1, the exchange rate has dropped to 125/USD. Isuzu is worried that it will receive fewer Yen per sale ($12,000 ~ 125 = 1.5 million). (d) Suppose the Bank of Japan intervenes in early October to push down the value of the Yen which subsequently moves to 225/USD. What problems and/or issues does it present for Japanese and American car companies? (2 points; 100 words) Question 2 (15 points) Assume Isuzu produces a car in Japan for $1.8 million. On June 1, when new models are introduced, the exchange rate is 150/USD. Consequently, the automaker sets the sticker price for the car at USD 12,000. By August 1, the exchange rate has dropped to 125/USD. Isuzu is worried that it will receive fewer Yen per sale ($12,000 ~ 125 = 1.5 million). (d) Suppose the Bank of Japan intervenes in early October to push down the value of the Yen which subsequently moves to 225/USD. What problems and/or issues does it present for Japanese and American car companies? (2 points; 100 words)
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