On May 1, 2XX3, a bundle of goods in China costs 5,000,000 yuan, while the same goods cost $60,000 in the United States. Over the next year, inflation in the U.S. is expected to be 3%, while inflation in China is expected to be 5%. Which of the following statements is true? A.In one year the exchange rate is $84.9515/yuan and the dollar has appreciated against the yuan. B.In one year the exchange rate is $0.0118/yuan and the dollar has appreciated against the yuan. C.In one year the exchange rate is $84.9515/yuan and the dollar has depreciated against the yuan. D.In one year the exchange rate is $0.0118/yuan and the dollar has depreciated against the yuan. E.In one year the exchange rate is 84.9515yuan/$ and the dollar has depreciated against the yuan.

In this we have to consider purchase power parity principal to calculate the future exchange rate.

On May 1, 2XX3, a bundle of goods in China costs 5,000,000 yuan, while the same goods cost $60,000 in the United States. Over the next year, inflation in the U.S. is expected to be 3%, while inflation in China is expected to be 5%. Which of the following statements is true? A. In one year the exchange

On May 1, 2XX3, a bundle of goods in China costs 5,000,000 yuan, while the same goods cost $60,000 in the United States. Over the next year, inflation in the U.S. is expected to be 3%, while inflation in China is expected to be 5%. Which of the following statements is true? A. In one year the exchange

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter22: International Financial Management

Section: Chapter Questions

Problem 8P

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	A.	In one year the exchange rate is $84.9515/yuan and the dollar has appreciated against the yuan.
	B.	In one year the exchange rate is $0.0118/yuan and the dollar has appreciated against the yuan.
	C.	In one year the exchange rate is $84.9515/yuan and the dollar has depreciated against the yuan.
	D.	In one year the exchange rate is $0.0118/yuan and the dollar has depreciated against the yuan.
	E.	In one year the exchange rate is 84.9515yuan/$ and the dollar has depreciated against the yuan.