Homework Answers
Nominal Exchange rate is ratio of value of currency of two countries.
$1 US = 83 yen
Real exchange rate= nominal exchange rate * foreign price/domestic price
If a Big Mac, fries, and a Coke cost $3.91 in San Francisco, then its cost must be in Yen in Osaka= Cost of goods basket in San Francisco * nominal exchange rate
=$3.91*83 yen
=324.53 Yen
=325 Yen in Osaka approximately.
Hence option a is the correct answer.
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1. Why did Volkswagen suffer a 95% drop in its 4th
quarter, 2003 profits?
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3. Do you think the Volkswagen’s decision to revert back to
hedging 70% of its foreign currency exposure was a good decision?
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