1. Two college students went to Guadalajara, Mexico, on their spring breaks. One took the vacation in 2002, while the other went in 2006. Each student had $500 to spend. In 2002, the exchange rate of MXN/USD (Mexican pesos to U.S. dollars) was 9. In 2006, the exchange rate was 11. A hotel room in Guadalajara cost 200 pesos per night in 2002 and 220 pesos in 2006. If each student spent five nights in a hotel, which student had more pesos left over? Exactly how many did that student have?

(5 points)

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1. A Canadian wheat farmer wants to buy a tractor in the United States. The tractor costs $100,000. In the fall of 2005, the CAD/USD (Canadian dollars to U.S. dollars) exchange rate was 1.2. In the spring of 2006, the exchange rate was 1.15. In which year would the farmer pay the least amount of Canadian dollars to buy the tractor?

(5 points)

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1. A marine biologist is planning to move from Sydney, Australia, to San Francisco. She has $5,000 Australian dollars (AUD) to make the move. In the summer of 2006, the exchange rate of USD/AUD (U.S. dollars to Australian dollars) is 0.765, and the USD is rising against the AUD. If the rising dollar trend continues, and all other economic elements remain equal, will her AUD be worth more USD now or later? Explain.

(5 points)

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1. A U.S. student studied abroad in Zrich, Switzerland. When he arrived in Zrich in January 2005, he exchanged $20,000 for Swiss francs when the exchange rate of USD/CHF (U.S. dollars to Swiss francs) was 1.15. When he left Zrich in January 2006, the exchange rate was 1.30. If he had started his year abroad in January 2006 instead of January 2005, would he have gotten more or fewer francs? What is the exact difference?

(5 points)

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1. The USD is rising quickly relative to the Indian rupee (INR). Will an Indian company that imports cars made in the United States find that car prices in INR will rise or fall? Explain.

(5 points)

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1. Considering what you've learned, how important is it to consider exchange rates when planning to travel to another country? Can anyone predict which currencies are likely to increase or decrease in value? Explain.

Your Score

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