Question

Sampson is a New Zealand exchange student in China, and he currently has 18,000 yuan in his bank account. If the exchange rate changes from 1 New Zealand dollar = 4.75 Chinese yuan to 1 New Zealand dollar = 4.89 Chinese yuan, what happens to the value in New Zealand dollars of the money in Sampson's bank account? A. It increases by $108.49. B. It decreases by $2520.00. C. It increases by $2520.00. D. It decreases by $108.49. SUBMIT

Answer 1

D. It decreases by $108.49

Explanation:

You want to know the effect on the value of 18,000 yuan in NZ$ if the exchange rate changes from 4.75 yuan per NZ$ to 4.89 yuan per NZ$.

Dollars

Sampson's account has an initial value in NZ$ of ...

(18,000 yuan) × (1 NZ$)/(4.75 yuan) ≈ NZ$ 3789.47

After the change in exchange rate, the account value is ...

(18,000 yuan) × (1 NZ$)/(4.89 yuan) ≈ NZ$ 3680.98

Change

The change in value is the difference between the new value and the old value:

NZ$ 3680.98 -3789.47 = NZ$ -108.49

The value of Sampson's bank account decreases by $108.49, choice D.

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