Question

Suppose one U.S. dollar can purchase 144 yen today in the foreign exchange market. If the yen depreciates by 8.0% tomorrow, how many yen could one U.S. dollar buy tomorrow?a. 155.5 yenb. 144.0 yenc. 133.5 yend. 78.0 yene. 72.0 yen

Answer 1

(c) 133.5 yen

Step-by-step explanation:

Today's foreign exchange rate: $1 can buy 144 yen

If the yen depreciates by 8% tomorrow, the value of the yen would decrease by (0.08×144 = 11.52 yen)

Therefore, tomorrow $1 could buy 132.48 yen (144 yen - 11.52 yen = 132.48 yen)

The closest option is (c)

Answer 2

The correct option is A

Step-by-step explanation:

When a currency depreciates it means it loses its value.

For the yen to depreciate by 8% it means that a dollar will buy more yen than it did today. by tomorrow. So, to calculate it we times the current price of the yen by the depreciation factor

144×0.8= 11.52

adding the depreciation factor to the current price of the yen

144+11.52=155.52

so by tomorrow $1=155.5yen