Question

Over the past month, the Swiss Franc (CHF) has depreciated 12 percent against pound sterling (GBP). How much has the pound sterling appreciated against the Swiss Franc?

a) 12%
b) Less than 12%
c) More than 12%
d) 0%

Answer 1

The pound sterling has appreciated by more than 12% against the Swiss Franc, because appreciation is calculated based on the initial value of the currency that has depreciated.

Step-by-step explanation:

If the Swiss Franc (CHF) has depreciated by 12 percent against the pound sterling (GBP), it means that the pound has increased in value relative to the Swiss Franc. However, the appreciation rate of the pound is not a straightforward 12 percent increase due to the relative change in value. To find out by how much the pound sterling has appreciated against the Swiss Franc, we can think of a hypothetical situation where initially 1 GBP = 1 CHF. If the CHF depreciates by 12%, it now requires 1.12 CHF to buy 1 GBP. The percentage change for the GBP is calculated as (New value - Original value) / Original value × 100%, which in this case is (1.12 - 1) / 1 × 100% = 12%. Therefore, the pound sterling has appreciated by more than 12%.