Question

Alumina Limited of Australia has called Mitsubishi UFJ Financial Group to get its opinion about the Japanese yen–Australian dollar exchange rate. The current rate is ¥67.72/A$, and Mitsubishi thinks the Australian dollar will weaken by 5% over the next year. What is Mitsubishi UFJ forecast of the future exchange rate

Answer 1

Mitsubishi UFJ Financial Group forecasts that the Australian dollar will weaken by 5% over the next year. The future exchange rate is estimated to be ¥64.334/A$ based on this forecast.

Step-by-step explanation:

Mitsubishi UFJ Financial Group forecasts that the Australian dollar will weaken by 5% over the next year. To calculate the future exchange rate, we need to account for this depreciation.

Currently, the exchange rate is ¥67.72/A$. If the Australian dollar weakens by 5%, we need to calculate 5% of the current rate and subtract it from the current rate.

5% of ¥67.72 is ¥3.386. Subtracting ¥3.386 from ¥67.72 gives us a forecasted exchange rate of ¥64.334/A$.

Answer 2

Step-by-step explanation:

If the Australian dollar weakens by 5% over the next year, then the A. L will need 5% more Australian dolar to buy Japanese yen. Calculate exchange rate after oe year as follows:

`\yen/AUD=(\yen67.72/AUD)* (\right (1.00)/(1.00+0.05))\left\\\\=\yen64.495/AUD`

Thus, the exchange rate over the next year is ¥64.495/AUD