A Canadian wheat farmer wants to buy a tractor in the United States

| November 24, 2016

A Canadian wheat farmer wants to buy a tractor in the United States. The tractor costs $100,000. In the fall of 2005, the CAD/USD (Canadian dollars to U.S. dollars) exchange rate was 1.2. In the spring of 2006, the exchange rate was 1.15. In which year would the farmer pay the least amount of Canadian dollars to buy the tractor?

A marine biologist is planning to move from Sydney, Australia, to San Francisco. She has $5,000 Australian dollars (AUD) to make the move. In the summer of 2006, the exchange rate of USD/AUD (U.S. dollars to Australian dollars) is 0.765, and the USD is rising against the AUD. If the rising dollar trend continues, and all other economic elements remain equal, will her AUD be worth more USD now or later? Explain.

A U.S. student studied abroad in Zürich, Switzerland. When he arrived in Zürich in January 2005, he exchanged $20,000 for Swiss francs when the exchange rate of USD/CHF (U.S. dollars to Swiss francs) was 1.15. When he left Zürich in January 2006, the exchange rate was 1.30. If he had started his year abroad in January 2006 instead of January 2005, would he have gotten more or fewer francs? What is the exact difference?

The USD is rising quickly relative to the Indian rupee (INR). Will an Indian company that imports cars made in the United States find that car prices in INR will rise or fall? Explain.

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