Question

EUSD SS GBP 0.80162 1.24747 0.71593 1.09346 0.63483 0.57390 0.87654 0.50889 II CAD O EUR BAUD 1.39678 0.91453 1.57523 1.74245 1.14085 1.96506 0.65474 1.12776 1.52733 1.72246 .88672 0.58057 Refresh in 0:44 | Apr 10, 2020 18:06 UTC 0 0

All answers will be in the form of   X.XX

1. Since November of 2014 there has been an increase in British preference for Australian goods, causing to exchange rate to change by 5.5% to the value(s) shown above. From the British perspective, what must have been the exchange rate in 2014?

2. [A repeat the exercise in #1, except show the exchange rate in 2014 from the Australian perspective.] Since November of 2014 there has been an increase in British preference for Australian goods, causing to exchange rate to change by 5.5% to the value(s) shown above. From the Australian perspective, what must have been the exchange rate in 2014?

Answer 1

In 2020, 1 Pound = 1.96506 AUD

As there is increase in prefrence for Australian goods, Australian dollar must have appreciated against Pound. Since 2014, there is 5.5% change in exchange rate which cause Austrlian dollar to rise against Pound.

a) In 2020, 1 Pound = 1.96506 AUD

In 2014, exchange rate British perspective must be 1 Pound = 1.96506 / 1.055 = 1.8626 AUD.

b) In 2020, 0.50889 Pound = 1AUD.

In 2014, exchange rate in Australian perspective must be 1AUD = 0.50889 * 1.055 = 0.5368 Pound