BBB4M – International Business
1.
Currency Exchange Worksheet
Visit www.xe.com or www.x-rates.com . Using the Quick Cross Rates given below, and with pencil and calculator
only, perform the following currency conversions. Use the proper currency symbols wherever possible. Example:
Euros  €. Use the Quick Currency Converter to check your answers.
a)
b)
c)
d)
e)
f)
2.
25 Swiss Francs  British Pounds
50 USD  Russian Rubles
100 Euros  Mexican Pesos
1000 Chinese Yuan  British Pounds
100 Mexican Pesos  USD  Japanese Yen
An American tourist buys Euros at today’s rate (1 USD = 0.769349 €) for a trip in the summer. Suppose decides
not go and converts her Euros to USD at a later date when 1 USD = 0.759900 €.
(i) Did the Euro strengthen or weaken against the dollar?
(ii) How much did she gain/lose in this situation?
A Canadian tourist visits Vietnam and spends 183 million VND (Vietnamese Dong) during her stay. When she
returns to Canada she converts the remaining VND she has to CAD and receives 1,225 CAD at today’s exchange
rates. How much did she spend during her stay in CAD?
An American manufacturer agrees to sell 10,000 air conditioning units to a South African importing firm and
retailer in Johannesburg. The agreed price per unit is $375 USD. Payment will be made today.
a)
What is the exchange rate value of each air conditioner in Rand?
b)
What is the total import cost per unit if the importer must pay an import duty of 5%, a 15% charge for shipping
and handling, and a Value Added Tax of 12% (all charges apply to the import cost per unit)?
c)
What is the final retail price to South African consumers if a 50% mark-up per unit for profit is applied to the
total import unit cost?
d)
CHALLENGE QUESTION
Suppose payment to the American suppliers is not made until 30 days later at which time the Rand is expected to
weaken against the USD by 10%. Use the percent change formula to determine the new 30 day exchange rate
then calculate the impact the new currency exchange rate will have on the importer’s profits. (Hint: What is the
added cost per unit? This will have to come out of profits unless the company increases its retail price, which it
may not be able to do without upsetting its customers.) [percent change = new value – old value x 100%]
old value
3.
4.
On the xe.com site, under Tools, Click on Current and Historical Rate Tables. On the x-rates.com site click
on Historic Lookup under Menu.
(a)
Find the CAD/USD exchange rate on Feb 1 2000. Compare this conversion rate with today’s
latest exchange rate. Calculate the percent increase in the value of the CAD relative to the USD.
(b)
Beginning Dec 01 2004 and ending Dec 31, did the CAD strengthen or weaken against the AUD
during this period? Why?
(c)
How much would a Canadian importer have to spend in CAD to buy a shipment of goods worth
1000,000 Yen on August 1, 1997?
(d)
Suppose an investor has two options: Invest 1000 000 CAD on Sept 01, 2004, @ 4% for 1 year
in a Canadian bank; or, convert the money into Pounds Sterling on Sept 01, 2004 and invest the
Pounds @ 5% for 1 year in a U.K. bank. Perform the necessary calculations and decide which
option is best for the investor given that she must convert the Pounds Sterling into CAD on Sept
01, 2005? Use historical exchange rate information.
(e)
Suppose a company is considering expanding its manufacturing operations internationally and
budgets 50 million CAD to do so. One of the countries it is considering in Ireland. The original
start date for constructing a new plant at a cost of 22 million CAD was set for Sept 01 2007, but
delays and issues with government regulations delayed the start date to April 01 2008. What
was the effect of the delay in the start date on the cost of construction?
(a) Summarize the main points in Currency Risk Factors, Page 293. You should be familiar with the terms:
floating rate, currency devaluation, currency revaluation, and exchange controls.
(b) Describe what is meant by currency speculation.
Exchange rates for 30 November 2010 on www.xe.com .