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Exchange Rates and Dollar Price of Japanese Cars

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The U.S. imports Japanese cars with a domestic price of 5,000,000 yen and the yen/dollar exchange rate is 120 on January 1, 2003. On January 1, 2004 the yen/dollar exchange rate is 125. What is the dollar price of the cars on January 1, 2003? What is the dollar price of the cars on January 1, 2004?

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The U.S. imports Japanese cars with a domestic price of 5,000,000 yen and the yen/dollar exchange rate is 120 on ...

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Japanese cars and exchange rate calculations.

$2.19
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Interest Rate & Purchasing Power Parity

1. Interest Rate Parity

Six month T-bills have a nominal rate of 7%, while default free Japanese bonds that mature in 6 months have a nominal rate of 55%. In the spot exchange market, I yen equals $0.009. If interest rate parity holds, what is the 6 months forward exchange rate?.

2. Purchasing Power Parity:

A television set costs $500 in the United States. The same set costs 550 euros in France. If purchasing power parity holds, what is the spot exchange rate between the euro and the dollar?

3. Result of Exchange Rate Changes:

Early in September 1963, it took 246 Japanese yen to equal $1. More than 20 years later that exchange rate had fallen to 108 yen to $1. Assume the price of a Japanese were in direct relation to exchange rates.

a-Has the price, in dollars, of the automobile increased or decreased during the 20 years period because of changes in the exchange rate?

b-What would the dollar price of the car be, assuming the car's price changes only with exchange rates?

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