Question

Suppose that 1 swedish krona could be purchased in the foreign exchange market today for $0.29. if the krona appreciated 9% tomorrow against the dollar, how many kronas would a dollar buy tomorrow? do not round intermediate calculations. round your answer to two decimal places.

Answer 1

Following the 9% appreciation of the Swedish krona against the dollar, one could buy approximately 3.16 kronas with one dollar, considering the original value was $0.29 per krona.

Step-by-step explanation:

If 1 Swedish krona can be purchased for $0.29 today, and if the krona appreciates by 9% against the dollar tomorrow, we need to calculate the new value of 1 krona in terms of dollars and then determine how many kronas could be bought for 1 dollar.

Step 1: Calculate the New Value of 1 Krona

An appreciation of 9% means that the krona's value increases by 9% of its current value. If the current value is $0.29, the new value of the krona after appreciation is given by: $0.29 + 0.09 × $0.29 = $0.29 + $0.0261 = $0.3161.

Step 2: Calculate the Number of Kronas Per Dollar

To find out how many kronas a dollar would buy tomorrow, take 1 and divide it by the new value of 1 krona: 1/$0.3161 ≈ 3.16 kronas per dollar.

Therefore, after a 9% appreciation of the krona against the dollar, one could buy approximately 3.16 kronas with one dollar.