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. Not enough information

Answer 1

When the Swiss Franc depreciates by 12 percent against the pound sterling, the pound appreciates by more than 12 percent due to the inverse relationship between the two currencies.

Step-by-step explanation:

When the Swiss Franc (CHF) has depreciated 12 percent against pound sterling (GBP), it implies that the value of the pound has increased relative to the Swiss Franc. To find the percentage by which the pound sterling has appreciated, we use the formula for percentage increase which is (New Value - Original Value) / Original Value * 100. However, since the new value is unknown, a straightforward percentage calculation might be misleading because the base values are different in each scenario. The correct mathematical approach involves understanding that the value of the currencies are inversely related. Thus, if the Franc depreciates by a certain percentage, the pound appreciates by a different percentage which is calculated by the reciprocal relation. So, the pound sterling has appreciated more than 12 percent against the Swiss Franc. The answer is therefore 'c. More than 12%'.

Answer 2

The pound sterling has appreciated more than 12% against the Swiss Franc when the CHF depreciated by 12% against the GBP.

Step-by-step explanation:

When the Swiss Franc (CHF) depreciates by 12 percent against the pound sterling (GBP), it means that you now need more CHF to buy the same amount of GBP. In this situation, the value of GBP relative to CHF has increased, but by a different percentage than the 12% depreciation of the CHF. The percentage increase of the GBP is calculated using the formula: Appreciation Rate = (1 / (1 - Depreciation Rate)) - 1. In this case, it would be 1 / (1 - 0.12) - 1, which is approximately 0.1364, or 13.64%. Hence, the correct answer is that the pound sterling (GBP) has appreciated more than 12% against the Swiss Franc.