Question

3. You are given the following exchange rates: Exchange Rates Time 0 Time 1 So Si USD / GBP 1.8558 1.8561 USD/EUR 1.2674 1.2622 CAD / USD 1.3111 1.3129 MXN / USD 10.7575 10.6780 AUD/USD 1.3095 1.3025 ZAR / USD 6.8330 6.8850 Where: GBP = British Pound: CAD Canadian Dollar; MXN - Mexican Peso; AUD = Australian Dollar; ZAR = South African Rand Using the information above: a. Which foreign currencies are directly quoted? b. Which foreign currencies are indirectly quoted? c. What is the percentage change in the value of the GBP? d. What is the percentage change in the value of the AUD? e. What is the percentage change in the value of the EUR? f. What is the percentage change in the value of the MXN?

Answer 1

a) GBP AND EUR

b) CAD, MXN, AUD and ZAR

To calculate percentage change in a particular currency, you will first need to make it the base currency and then calculate.

c) No conversion required since GBP is already the base currency

% change =(1.8561/1.8558)-1

= 0.0162%

d) As AUD is not the base currency, we will need to convert it. Take reciprocal to convert to the base currency

USD/AUD (at time 0) = 1/1.3095

= 0.7637

USD/AUD (at time 1) = 1/1.3025

= 0.7678

% change = (0.7678/ 0.7637)-1

= 0.5369%

e) % change = (1.2622/1.2674)-1

= -0.4103%

f) take reciprocal to convert

USD/MXN (at time 0) = 1/10.7575

= 0.0930

USD/MXN (at time 1) = 1/10.6780

= 0.0937

% change = 0.7527%

g) At time 1, AUD/ZAR = AUD/USD * (1/ZAR/USD)

= (1.3025*(1/6.8850))

= 0.1892

h) ZAR/GBP = (ZAR/USD)*(USD/GBP)

= 12.7236

I) EUR/GBP= (1/(USD/EUR))* (USD/GBP)

= 1.4705