Assume the following rates for the US dollar per units of foreign currency:

June 2010 June 2006

Brazil (real) 1.7973 2.3555

China (yuan) 6.8086 8.2865

Mexico (peso) 12.8355 10.7630

Now answer the following:

You and a friend, Yi, are considering a summer vacation to one of two locales, Mexico or Brazil.

Mexico’s currency unit is the Mexican peso and the real is used in Brazil. You live in the

United States and Yi lives in China. The cost of the hotel is denominated in local currency units.

You and Yi are trying to choose the locale with the lowest hotel expenses. The price of a hotel

room is 200 reals per night in Brazil and 800 pesos per night in Mexico. Assume these prices remain unchanged between 2006 and 2010.

a.Calculate the U. S. dollar price of a hotel room in Brazil and in Mexico for June 2006. Calculate these prices for 2010. Based on your answers, (on cost alone), where would you spend your vacation in June 2006? In June 2010?

b.Would Yi make the same choices? Why (not)?