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Assume the Yen/Dollar exchange rate is currently ¥104
Assume the Yen/Dollar exchange rate is currently ¥104.16/$ and the Dollar is expected to appreciate by 5%. Calculate the future exchange rate. X98.95/$ Onone of the answers is correct ¥109.64/$ 499.20/$ ¥109.377$
Expert Solution
Here given,
Spot Yen/dollar exchange rate = Yen104.16/$
Now, $ is expected to appreciate by 5%
Future exchange rate =?
Since, $ is the base currency in given exchange rate and base currency is expected to appreciate, we will multiply the current exchange rate with 1.05 (since there is 5% appreciation) to get future exchange rate
Therefore, future exchange rate = Yen104.16*1.05
= Yen109.37/$
Hence, Future exchange rate will be Yen109.37/$, i.e last option is correct answer.
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