Exchange rate

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Chapter 6, Problem 6QQ

To determine

Exchange rate

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Given the definition of the exchange rate , if the Canadian dollar is the domestic currency and US dollar the foreign currency, what does a nominal exchange rate of 1.15 means?

1 Suppose that two countries, Indonesia and Vietnam, produce coffee. The currency unit used in Indonesia is the Rupiah (IDR). The currency unit used in Vietnam is the Dong (VND). In Vietnam, coffee sells for 4,500 dong (VND) per pound. The exchange rate is 1.57 VND per 1 IDR, EVND/IDR = 1.57. 2 If the law of one price holds, what is the price of coffee in Indonesia, measured in Rupiah (assume we are talking about the same type of coffee)? Please round your answer to the nearest whole number. Assume the price of coffee in Indonesia is actually 3000 IDR per pound. Compute the relative price of coffee in Indonesia versus Vietnam (round your answer to 2 decimal places). Where will coffee traders buy coffee? Where will they sell coffee in this case? How will these transactions affect the price of coffee in Vietnam? In Indonesia?

The euro/dollar exchange rate is 1 euro = $1.20. According to the law of one price, a camera that sells for $240 in New York should sell for how many euros in Germany?