On 29 March 2004, the /$ exchange rate was 0.82/$ compared to 0.94/$ exactly one year before.
Question:
On 29 March 2004, the €/$ exchange rate was €0.82/$ compared to €0.94/$ exactly one year before. On the same day, the £/$ exchange rate was £0.56/$ compared with £0.62/$ one year earlier
1 Calculate the percentage appreciation of the euro against the dollar over the previous year. Calculate the percentage appreciation of sterling against the dollar over the previous year.
2 Calculate the percentage appreciation or depreciation of sterling against the euro over the previous year. Calculate the percentage appreciation or depreciation of the euro against sterling over the previous year.
3 Does the percentage appreciation or depreciation of sterling in (1) equal the euro depreciation or appreciation in (2) multiplied by negative one? Explain your answer.
4 Review the international parity conditions. Do you believe they work? Explain.
Expert Answer:
1 Calculate the percentage appreciation of the euro against the dollar over the previous year Calculate the percentage appreciation of sterling agains... View the full answer
