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Home / Questions / Assume that the export price of a Toyota Corolla from Osaka, Japan is 42,150,000. The exch...

Assume that the export price of a Toyota Corolla from Osaka, Japan is 42,150,000. The exchange rate is 187.00/5. The forecast rate of inflation in the United States is 2.2% per year and is 0.0% per

Assume that the export price of a Toyota Corolla from Osaka, Japan is 42,150,000. The exchange rate is 187.00/5. The forecast rate of inflation in the United States is 2.2% per year and is 0.0% per year in Japan. Use this data to answer the following questions on exchange rate pass-through. (a). What was the export price for the Corolla at the beginning of the year expressed in U.S. dollars? (b). Assuming purchasing power parity holds, what should the exchange rate be at the end of the year? (C). Assuming 100% pass-through of exchange rate, what will be the dollar price of a Corolla at the end of the year? (d). Assuming 75% pass-through, what will be the dollar price of a Corolla at the end of the year? Q2- Kingdom Enterprises is a Indian exporter of leather goods and files all of its financial statements in Indian rupees (INR). The company's American sales director, Carl Murphy, has been criticized for his performance. He disagrees, arguing that sales in America have grown steadily in recent years. Who is correct? 2018 2019 342,550 375.000 2020 Total net sales (INR) 489,800 Sales in America (% age Indian sales) 24% 20% Exchange Rate (INR/S) INR 62.1/$ INR 60.2/5 22% INR 60.5/5 Q3 - Karl Messy Plc, a manufacturer of computer equipment near Shenzhen China, ships an order to a buyer in Kenya. The purchase price is $222,500. Kenya imposes a 15% import duty on all products purchased from China. The Kenyan importer then re-exports the product to an Oman importer, but only after imposing their own resale fee of 20%. Given the following spot exchange rates on December 31, 2020, what is the total cost to the Oman importer in Omani riyal, and what is the U.S. dollar equivalent of that price? Currency Spot Rate Kenyan Shilling per US Dollar ($) 109.17/8 Kenyan Shilling per Chinese Yuan 16.73/Yuan Omani riyal (OMR) per U.S. dollar ($) OMR 0.3845/5 Kenyan Shilling per Omani Riyal (OMR) 283.464 OMR Q4 - What are the motives of different players in the foreign exchange market? What kind of foreign exchange regime is being followed in the context of Oman and what are the future exchange range you are analyzing for Omani Riyal?
Q2 - Kingdom Enterprises is a Indian exporter of leather goods and files all of its financial statements in Indian rupees (INR). The company's American sales director, Carl Murphy, has been criticized for his performance. He disagrees, arguing that sales in America have grown steadily in recent years. Who is correct? 2018 2019 342.550 375.000 2020 Total net sales (INR) 489,800 Sales in America (% age Indian sales) 24% 20% Exchange Rate (INR/S) INR 62.1/8 INR 60.2/5 22% INR 60.5/5

Apr 12 2021 View more View Less

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