1.) An Australian miner sells coal to a Japanese importer for 70,000,000 JPY. The importer will make payment in 30 days. The Australian miner keeps its financial statements in AUD.
It books a sale and records an accounts receivable in AUD. The current exchange rate is 86.95 JPY / AUD. What is the AUD value of the receivable? (805,060.38 AUD).
Suppose that in 30 days the exchange rate has changed to 84.55 JPY / AUD and the importer pays the 70,000,000 JPY. How may AUD does the Australian miner collect? (827,912.48 AUD).
What is the change in the account receivable? (22,852.10 AUD)
How much (in percent) did the Australian miner lose as a result of the exchange rate change? (2.84%)
2.) A U.S. Investor wants to invest $5,000 in China at a 6% interest rate. Today the exchange rate is 6.88 CNY/USD.
How many CNY will the investor have in one year? (36,464 CNY)
The investor exchanges CNY for USD at 6.75 CNY/USD. How many USD does the investor have? ($5,402.07). What is the investors return? (8.04%)
Which currency appreciated? (CNY - it takes fewer CNY to buy a dollar)
Which currency depreciated? (USD - a USD buys fewer CNY).
How much, in percent, did the USD depreciate? (-1.89%)
3.) The current British Pound to Euro exchange rate is £.86/€. How many Euros does it take to buy one British Pound? (£1.1628)
In one year, the exchange rate becomes £.75/€. Which currency appreciated? (£). Which currency depreciated? (€).
In percent, how much did the appreciating currency rise? (14.67%)