Question: Assume that the spot exchange rate between U.S. Dollar and Chinese Yuan is $1 = 6.70 Yuan At this exchange rate, how much would a

Assume that the spot exchange rate between U.S. Dollar and Chinese Yuan is $1 = 6.70 Yuan

At this exchange rate, how much would a HP laptop which costs $____ (choose a reasonable number) in Houston cost in Beijing? (Ignore the costs of shipping and handling and any tariff)

Assume that, China agrees to let Yuan appreciate by 10%. What is the new exchange rate after the appreciation?

How much would the laptop (in Q1) cost in Houston after the Yuan appreciation?

How much would the laptop (in Q1) cost in Beijing after the Yuan appreciation?

What is likely to happen to U.S. exports to China when Yuan appreciates? Why?

What is likely to happen to U.S. imports from China when Yuan appreciates? Why?

Assume that Chinese yuan is pegged to the U.S. dollar at $1 = 6.70 yuan. If the Chinese central bank (Peoples Bank of China) maintains a +/- 3% range of tolerance (up or down), compute the range in which yuan can fluctuate without any intervention from the PBOC.

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