Calculating Exchange Rates Assignment Directions: Use the information in Table 1 to answer questions 1-3. Table 1: How much does S1 (Le., sometimes abbreviated USD) buy in each of these currencies for the month of January and the month of March? Name of Country Exchange Rate Exchange Rate January March $1 = $1= Polish Zloty 4.50 4.08 Mozambique Meticals 62.50 66.00 Albanian Lek 109.08 111.60 Australian Dollar 1.85 1.67 1. If you knew the price of an item such as a hamburger combo meal in Polish Zlotys, howwould you determine how many dollars you would need to buy it? Provide a possible equation below:

Exchange Rate Regime Assume interest parity condition as (see image) Under what circumstances will the domestic interest rate exceed the foreign interest rate?

Assume that there is a free-floating exchange rate. Interest rates rise in the UK, relative to those abroad. Discuss the effect that you would expect this to have on exchange rates. You should consider the effect on currency supply and demand, and illustrate your answer with a diagram. You should also consider how this relates to the concept of uncovered interest rate parity, and discuss this with the help of an equation.

The Nominal exchange rate is .8 British pounds per dollar. If a burger in the United States costs $10, how many British pounds must a burger cost in London for purchasing-power parity to hold?