You Do the Math
following questions based on what you’ve learned about currency exchange rates.
To find the amount of U.S. dollars that any given amount of currency will buy,
simply multiply the currency by the exchange rate provided.
1. Two college students went to
Guadalajara, Mexico, on their spring breaks. One took the vacation in 2002,
while the other went in 2006. Each student had $500 to spend. In 2002, the
exchange rate of MXN/USD (Mexican pesos to U.S. dollars) was 9. In 2006, the
exchange rate was 11. A hotel room in Guadalajara cost 200 pesos per night in
2002 and 220 pesos in 2006. If each student spent five nights in a hotel, which
student had more pesos left over? Exactly how many did that student have?
2. A Canadian wheat farmer wants to buy a
tractor in the United States. The tractor costs $100,000. In the fall of 2005,
the CAD/USD (Canadian dollars to U.S. dollars) exchange rate was 1.2. In the
spring of 2006, the exchange rate was 1.15. In which year would the farmer pay
the least amount of Canadian dollars to buy the tractor?
3. A marine biologist is planning to move
from Sydney, Australia, to San Francisco. She has $5,000 Australian dollars
(AUD) to make the move. In the summer of 2006, the exchange rate of USD/AUD (U.S.
dollars to Australian dollars) is 0.765, and the USD is rising against the AUD.
If the rising dollar trend continues, and all other economic elements remain
equal, will her AUD be worth more USD now or later? Explain.
4. A U.S. student studied abroad in
Zürich, Switzerland. When he arrived in Zürich in January 2005, he exchanged
$20,000 for Swiss francs when the exchange rate of USD/CHF (U.S. dollars to
Swiss francs) was 1.15. When he left Zürich in January 2006, the exchange rate
was 1.30. If he had started his year abroad in January 2006 instead of January
2005, would he have gotten more or fewer francs? What is the exact difference?
5. The USD is rising quickly relative to
the Indian rupee (INR). Will an Indian company that imports cars made in the
United States find that car prices in INR will rise or fall? Explain.
6. Considering what you’ve learned, how
important is it to consider exchange rates when planning to travel to another
country? Can anyone predict which currencies are likely to increase or decrease
in value? Explain.