Exchange Rate Determination
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Question:
One US $ buys 50 West African francs, now. In one year, it buys 80 W. African francs. Derive the percentage change as W. African francs and US $, as well as US dollars per W. African francs.
Computing the percent in USD
= (80-50)/50
=30/50
= 0.6
The premium is 60%
Computing the percent in Western African Francs
= (0.0125 0.02) / 0.02
= (-0.0075)/0.02
= -0.375
The discount is at -37.5%
(This needs to be answered)
Analyze the result of 1in both ways.
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