Over the past year, China has experienced an inflation rate of about 22%, in contrast to U.S. inflation of about 3%. At the same time, the exchange rate has gone from Y8.7/U.S.$1 to Y8.3/U.S.$1. a. What has happened to the real value of the yuan over the past year? Has it gone up or down? […]
What has happened to the real value of the yuan over the past year? Read More »
In 1990, a Japanese investor paid $100 million for an office building in downtown Los Angeles. At the time, the exchange rate was ¥145/$. When the investor went to sell the building five years later, in early 1995, the exchange rate was ¥85/$ and the building’s value had collapsed to $50 million. a. What exchange
How much has the investor lost in yen terms? Read More »
In 1990, a Japanese investor paid $100 million for an office building in downtown Los Angeles. At the time, the exchange rate was ¥145/$. When the investor went to sell the building five years later, in early 1995, the exchange rate was ¥85/$ and the building’s value had collapsed to $50 million. a. What exchange
How much has the investor lost in yen terms? In dollar terms? Read More »
In 1990, a Japanese investor paid $100 million for an office building in downtown Los Angeles. At the time, the exchange rate was ¥145/$. When the investor went to sell the building five years later, in early 1995, the exchange rate was ¥85/$ and the building’s value had collapsed to $50 million. a. What exchange
How could the investor have hedged his risk? Read More »
In 1990, a Japanese investor paid $100 million for an office building in downtown Los Angeles. At the time, the exchange rate was ¥145/$. When the investor went to sell the building five years later, in early 1995, the exchange rate was ¥85/$ and the building’s value had collapsed to $50 million. a. What exchange
What exchange risk did the Japanese investor face at the time of his purchase? Read More »
During 1993, the Japanese yen appreciated by 11% against the dollar. In response to the lower cost of its main imported ingredients—beef, cheese, potatoes, and wheat for burger buns—McDonald’s Japanese affiliate reduced the price on certain set menus. For example, a cheeseburger, soda, and small order of french fries were marked down to ¥410 from
During 1993, the Japanese yen appreciated by 11% against the dollar. In response to the lower cost of its main imported ingredients—beef, cheese, potatoes, and wheat for burger buns—McDonald’s Japanese affiliate reduced the price on certain set menus. For example, a cheeseburger, soda, and small order of french fries were marked down to ¥410 from
What will be the percentage change in McDonald’s dollar profit from this meal? Read More »
What is the implied price elasticity of demand associated with this necessary rise in demand? During 1993, the Japanese yen appreciated by 11% against the dollar. In response to the lower cost of its main imported ingredients—beef, cheese, potatoes, and wheat for burger buns—McDonald’s Japanese affiliate reduced the price on certain set menus. For example,
During 1993, the Japanese yen appreciated by 11% against the dollar. In response to the lower cost of its main imported ingredients—beef, cheese, potatoes, and wheat for burger buns—McDonald’s Japanese affiliate reduced the price on certain set menus. For example, a cheeseburger, soda, and small order of french fries were marked down to ¥410 from
How much of a volume increase is necessary to justify the price cut from ¥530 to ¥410? Read More »
Can Chemex eliminate its operating exposure by hedging its position every time it makes a foreign sale or by pricing all foreign sales in dollars? Chemex, a U.S. maker of specialty chemicals, exports 40% of its $600 million in annual sales: 5% to Canada and 7% each to Japan, Britain, Germany, France, and Italy. It